The U.S. Supreme Court on Tuesday rejected a petition by Patriarch Partners and CEO Lynn Tilton to challenge the constitutionality of the Securities and Exchange Commission’s in-house administrative law judges. The SEC had argued against accepting the petition.
On June 1, 2016, the 2nd U.S. Circuit Court of Appeals in New York upheld a lower court’s dismissal of the case until the government completes its internal process.
After a five-year investigation that began in late 2009, SEC officials charged the firm in April 2015 with improper asset valuation and performance disclosure with three collateralized loan obligation funds. Patriarch Partners and Ms. Tilton, who called the charges meritless, immediately filed legal challenges.
In an emailed statement, Patriarch Partners said, “We believe — as the U.S. Court of Appeals for the 10th Circuit recently held — that the SEC’s process for appointing ALJs violates the U.S. Constitution. For several years now, we have been fighting the underlying civil claims brought by the SEC. The administrative hearing held last year proved what we have been saying all along: that those claims are based on false and ill-founded premises that are rooted in a fundamental misunderstanding of the design of the Zohar Funds and Patriarch’s investment strategy. We expect to be fully vindicated by the ALJ, before the commission, or in a court of law.”