Patriarch Partners and CEO Lynn Tilton are fighting back against charges announced by the SEC on Monday involving three of the private equity firm's funds.
Patriarch and Ms. Tilton filed a lawsuit in U.S. District Court in New York on Wednesday, challenging the Securities and Exchange Commission's use of its administrative proceedings process and arguing that the case should be heard by a U.S. District Court.
The SEC's administrative process violates the Constitution because administrative law judges hearing the cases, unlike District Court judges, are not subject to removal, Patriarch's suit said.
After a five-year investigation that began in late 2009, officials at the Securities and Exchange Commission on Monday charged the firm with improper asset valuation and performance disclosure with three collateralized loan obligation funds. The SEC order called for a public hearing within 60 days and an initial decision within 300 days. Patriarch wants the court to stop that process “to prevent suffering irreparable reputational and financial harm,” and to order a jury trial, the complaint said.
“We felt compelled to bring this suit,” Ms. Tilton and Patriarch said in a statement. “The SEC wants to litigate this matter in its own administrative court before its own administrative judges, without the same due process rights available to litigants in the federal courts, notwithstanding the collateral damage that may result.”
