NEW YORK — A Wall Street executive who developed a “Diva of Distressed” reputation for reversing the fortunes of distressed companies on Tuesday disputed the government’s portrayal of her as a powerbroker who cheated investors out of more than $200 million.
Lynn Tilton, testifying at a civil proceeding, told an administrative law judge that investors trusted her knowledge and experience when they invested in funds related to distressed companies.
“These were distressed deals,” she said. “They were signing up for my expertise ... as I took distressed companies from a place of darkness and loss to a place of profitability.”
The Securities and Exchange Commission has accused her of cheating investors by misleading them about companies’ ability to meet debt obligations. The commission is seeking to have her banned from the securities industry and to pay back more than $200 million.
When questioned by an SEC lawyer, Tilton said she made it clear to investors that their gains would come through interest, principal and equity upside.
She said the investors relied on her “expertise and the standard of care I would exercise” when they decided to put money into her New York-based Patriarch Partners group of investment firms.
Tilton attorney Randy Mastro has said his client was worth $1 billion or close to it when the regulatory agency claims she began the fraud in 2003.
SEC senior trial counsel Dugan Bliss said earlier in the proceeding that Tilton routinely let her companies pay less interest than they owed on their loans without disclosing to investors that the companies were not current with their payments.
Mastro has said Tilton put $440 million of her own money into companies and investment funds and sacrificed fees and dividends she was owed for two years during the financial crisis.
Mastro said investors were told up front in their contracts that Tilton had wide discretion to revive distressed companies.