Well-known investment firm executive Lynn Tilton was charged with fraud for allegedly duping investors by not disclosing weak performance in three asset funds, the U.S. Securities and Exchange Commission said on Monday.
Tilton, who reportedly refers to herself as the "turnaround queen" due to her penchant for buying distressed assets, and her Patriarch Partners "defrauded clients by failing to value assets using the methodology described to investors" in accessing the performance of loans underlying three collateralized loan obligations, or CLOs, the SEC said.
The SEC said Tilton and Patriarch reported to investors that the valuations of the loan assets were unchanged despite the failure of several companies to make interest payments. Others only made partial payments.
By failing to disclose the poor performance of those assets, the SEC said, Tilton and the companies avoided having their management fees reduced and relinquishing control of some of the funds.
"Instead of informing their clients about the declining value of assets in the CLO funds, Tilton and her firms have consistently misled investors and collected almost $200 million in fees and other payments to which they were not entitled," Andrew J. Ceresney, director of the SEC's Enforcement Division said in a statement.