In the Matter of Lynn Tilton et al., Before the US Securities and Exchange Commission
In what has been described as the largest administrative case in US Securities and Exchange Commission (SEC) history, investment manager Lynn Tilton and her company Patriarch Partners were successful in having SEC allegations of misconduct and fraud against them dismissed. The case focused on three collateralized loan obligations known as the Zohar Funds, which had raised $2.5 billion. Money from the funds was used by Tilton to buy or make loans, primarily to private, midsized distressed companies. The SEC claimed that Ms. Tilton disregarded disclosure requirements by characterizing the loans “however she personally saw fit, without disclosure to investors.” The SEC also alleged that Ms. Tilton hid the true financial conditions of the companies that collateralized the loans and that she enriched herself at the expense of her investors.
Working with Ms. Tilton's counsel, an Analysis Group team supported testimony by affiliates R. Glenn Hubbard, Thomas Lys, John Dolan, and Steven Schwarcz. The defense experts collectively provided analysis to show that allegedly concealed information was, in fact, disclosed to (or reasonably known by) investors, and that the funds were managed in a manner consistent with Tilton's distinct business strategy. In a 57-page opinion, Administrative Law Judge Carol Fox Foelak agreed, dismissing all the charges and noting that Ms. Tilton's reports neither omitted nor misrepresented any material facts.