'Diva of Distressed' Tilton takes stand in SEC fraud trial

Tue Nov 1, 2016 7:01pm EDT
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By Nate Raymond

NEW YORK (Reuters) - Financier Lynn Tilton took the stand on Tuesday to defend herself against U.S. Securities and Exchange Commission charges that she defrauded investors in three debt funds that loaned money to distressed companies.

Tilton, the founder of private equity firm Patriarch Partners, told an SEC administrative law judge in Manhattan that investors were routinely provided information allowing them to know what steps she was taking with regard to those companies.

The SEC has accused Tilton of defrauding investors in the three collateralized loan obligation funds by miscategorizing companies that missed interest payments as current rather than in default to avoid losing $200 million in managements fees.

But Tilton, 57, said she was allowed to defer or forgive interest payments the distressed companies owed, as investors had turned to her for her expertise in turning around companies from "a place of darkness and loss to a place of profitability."

She said she sought to collect as much interest from those companies as possible without forcing them into insolvency, which would impair their future value.

"Everyone knew we were buying companies left for dead, and we were taking time to rebuild these companies," she said.

Known for her flashy outfits and colorful language and called the "Diva of Distressed" for taking over troubled companies, Tilton has portrayed herself as a hard-charging female executive in a male-dominated field.

In 2000, she founded Patriarch Partners, which counts among its portfolio companies MD Helicopters and Dura Automotive.   Continued...

New York financier Lynn Tilton, (L) founder of private equity firm Patriarch Partners, exits the U.S. District courthouse with her lawyer Randy Mastro (R) in New York City, U.S., November 1, 2016.  REUTERS/Brendan McDermid