There's nothing directly related to the American LaFrance Company in this case, but the story of Lynn Tilton and her firm Patriarch Partners has drawn significant attention from investors and regulators alike.
According to reports from bizjournals.com, the Securities and Exchange Commission (SEC) has filed a lawsuit against Tilton, accusing her of defrauding investors and charging them $200 million in fees that were not justified. The allegations center around her management of several investment funds, particularly those tied to collateralized loan obligations (CLOs). Tilton, who is known as the "Diva of Distressed Debt," has responded by launching a countersuit, arguing that the SEC violated her constitutional rights by filing the case in its own court rather than in a federal court.
This isn't the first time concerns have been raised about the SEC’s administrative court system, which critics say favors the agency. However, Tilton's reputation and the complexity of her business dealings made it difficult for her to gain public sympathy during her recent media appearances.
From SECactions.com, we learn more about the specifics of the SEC's charges. The agency has formally accused Tilton and her affiliated entities of fraud, alleging that she overvalued certain funds in a way that wasn't disclosed to investors. This led to unnecessary management fees being paid and an erosion of investor rights. The case, titled *In the Matter of Lynn Tilton*, was filed on March 30, 2015, under Adm. Proc. File No. 3-16462.
Tilton has managed several Patriarch Partners entities for years, including Patriarch Partners VIII, XIV, and XV. These are registered investment advisers and collateral managers for the Zohar Funds, which are structured as CLOs—securitization vehicles that pool commercial loans and issue secured notes to investors. The goal is to generate returns by managing distressed assets and eventually selling them at a profit.
The Zohar Funds operate under strict indenture agreements, which include specific rules for asset valuation and categorization. These rules are designed to protect investors by ensuring that the value of the collateral supports the debt issued by the fund. One key metric is the Overcollateralization Ratio, which measures the cushion between the collateral value and the principal amount of the notes. If this ratio falls below a certain level, investors gain more control over the fund and may demand early repayment.
Instead of following these guidelines, Tilton reportedly used her discretion to classify assets in a way that minimized downgrades. As a result, many underperforming or defaulted assets remained in higher valuation categories, leading to the payment of excessive Subordinated Fees. The SEC claims that this approach was not disclosed to investors and created a serious conflict of interest. Additionally, the valuations did not align with Generally Accepted Accounting Principles (GAAP), as stated in the financial reports.
The SEC alleges that Tilton willfully violated several sections of the Advisers Act, including 206(1), 206(2), and 206(4). A formal hearing is expected to be scheduled soon, and the outcome could have significant implications for both Tilton and the broader private equity industry.
Folding Storage Box,Collapsible Plastic Storage Boxes,Folding Moving Boxes,Collapsible Storage Bins
Jiangsu Ru Shun plastic industry Co., LTD , https://www.rushunsuye.com