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IPO INVESTIGATIONS ON SIX COMPANIES

OPENING ARGUMENTS BEGIN IN SEC CASE AGAINST PARTRIARCH’S LYNN TILTON

October 25, 2016/in News /by Jeff Peterson

Lawyers for the SEC argued yesterday that Patriarch Partners’ Lynn Tilton cheated investors in failing companies of more than $200 million and should be permanently banned from the industry.

Action Against Tilton

The SEC asserted that Tilton and her firm improperly collected the money in fees and other payments for over 10 years without disclosing to investors that companies were defaulting on loans the investors had made to the failing companies attempting turnarounds.

The SEC claimed this conduct was a clear breach of fiduciary duty, and that had investors known the material facts, they would not have invested with Patriarch.

The SEC is seeking in the action, among other things, disgorgement of the $200 million Tilton and her companies received in fees and other payments, a permanent ban on Tilton from the industry and monetary penalties against Tilton and her companies.

Tilton’s Rebuttal to Action

Tilton’s attorneys argued that there was no logic behind the SEC’s asserted fraud case, since Tilton was already worth $1 billion at the time and had no motivation to deceive any investors. Moreover, her attorneys claimed she put nearly half a billion dollars of her own money into the companies and investment funds during the financial crisis, which cuts against any argument she was seeking to dupe investors out of money.

Tilton’s counsel also emphasized the broad discretion Tilton and her companies had to revive the failing companies, stating that this also cut against any claim that investors were deceived about the state of the companies.

Tilton released a statement Monday before trial, stating, “For years now, I have been fighting for truth and justice, and I’m glad that we have reached the point where we can finally put the SEC’s case on trial.” She further said in the statement: “I’ve never fit the mold of Wall Street and the private equity industry, and it appears that this has made me a target. But I believe that ultimately the truth will prevail.”

The trial is expected to take several weeks. We will keep you updated on its progress.

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC investigations and SEC enforcement actions. He can be reached in California at 858.792.3666 and in Illinois at 312.450.4584.

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