'Diva of Distressed'
Tilton takes stand in SEC fraud trial
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[November 02, 2016]
By Nate Raymond
NEW
YORK (Reuters) - Financier Lynn Tilton took the stand on Tuesday to
defend herself against U.S. Securities and Exchange Commission charges
that she defrauded investors in three debt funds that loaned money to
distressed companies.
Tilton, the founder of private equity firm Patriarch Partners, told an
SEC administrative law judge in Manhattan that investors were routinely
provided information allowing them to know what steps she was taking
with regard to those companies.
The SEC has accused Tilton of defrauding investors in the three
collateralized loan obligation funds by miscategorizing companies that
missed interest payments as current rather than in default to avoid
losing $200 million in managements fees.
But Tilton, 57, said she was allowed to defer or forgive interest
payments the distressed companies owed, as investors had turned to her
for her expertise in turning around companies from "a place of darkness
and loss to a place of profitability."
She said she sought to collect as much interest from those companies as
possible without forcing them into insolvency, which would impair their
future value.
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"Everyone knew we were buying companies left for dead, and we were
taking time to rebuild these companies," she said.
Known for her flashy outfits and colorful language and called the "Diva
of Distressed" for taking over troubled companies, Tilton has portrayed
herself as a hard-charging female executive in a male-dominated field.
In 2000, she founded Patriarch Partners, which counts among its
portfolio companies MD Helicopters and Dura Automotive.
But in 2015, the SEC accused Tilton of defrauding investors in the three
funds, all called "Zohar," which had raised $2.5 billion to make loans
to distressed companies.
The SEC has asked Administrative Law Judge Carol Fox Foelak to force
Tilton and Patriarch Partners to pay at least $200 million and to bar
her from the securities industry.
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![](../images/110216PICS/busine33.jpg)
New York financier Lynn Tilton, (L) founder of private equity firm
Patriarch Partners, exits the U.S. District courthouse with her
lawyer Randy Mastro (R) in New York City, U.S., November 1, 2016.
REUTERS/Brendan McDermid
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Tilton denies any wrongdoing. She has taken an aggressive stance in
fighting the case, suing unsuccessfully to block what she called an
unconstitutional proceeding before an SEC in-house judge.
On the stand on Tuesday, her testimony was at times combative, with
Tilton often saying the SEC's lawyer, Dugan Bliss, had mischaracterized
her statements.
She defended her actions as collateral manager for the Zohar funds,
saying investors had the information they needed about how she was
dealing with the distressed companies' interest payments.
"It was obvious," she said. "It was disclosed. It was there for all to
see."
(Reporting by Nate Raymond in New York; Editing by Alan Crosby)
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