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Tilton created the loan vehicles known as the Zohar funds more
than a decade ago. The three funds have financed her investments
in ailing companies such as Dura Automotive Systems, earning her
the title of "Diva of Distressed."
However, one of the Zohar funds defaulted last year and Tilton's
Patriarch Partners investment firm stepped down as the
collateral manager and was replaced by restructuring firm
Alvarez & Marsal in March.
Alvarez sued Patriarch earlier this year and alleged it had not
turned over documents required to assess the Zohar collateral.
Alvarez's lawyer said during an August trial that Tilton was
playing a "shell game" with valuable assets, while Tilton
insisted that Alvarez had every document needed to manage the
Zohar collateral.
Vice Chancellor Joseph Slights determined that Patriarch was
obligated to produce the documents sought by Alvarez.
"The collection and production of these documents will no doubt
place a burden, perhaps even a significant one, on Patriarch,"
wrote Slights in a 51-page opinion.
However, Slights added that Patriarch enjoyed the benefits of
being the Zohar collateral manager for years and always knew it
faced substantial obligations if its services came to an end.
"Patriarch respectfully disagrees with the decision," said Reed
Brodsky of Gibson Dunn, the law firm representing Patriarch
Partners.
"We are reviewing our legal options and note that this document
production issue has no bearing whatsoever on the current SEC
administrative trial and the baseless charges made there."
The judge also said he was fully aware the litigation was driven
by wider aims of the parties. He said Patriarch believed the
Zohar funds were acting on behalf of the MBIA Insurance Corp,
which is seeking to push responsibility for an impending Zohar
default onto Patriarch.
The judge said the Zohar funds believed Patriarch was trying to
conceal Tilton's conflicting roles during her management of the
Zohar funds. The judge said he was not expressing a view on
those allegations.
Tilton began defending herself at trial this week against a
fraud lawsuit brought by the Securities and Exchange Commission.
The regulator has accused Patriarch of hiding the poor
performance of assets underlying the Zohar funds and allegedly
collected nearly $200 million in improper fees.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Lisa
Shumaker, Bernard Orr)
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