Recap of Lynn Tilton’s Scuffle with the SEC

Earlier this week, the SEC filed an administrative action against Lynn Tilton and her Patriarch Partners funds.  See In re Lynn Tilton et al.  CNBC has reported that the SEC is  “accusing Patriarch of hiding the poor performance of loans underlying three collateralized loan obligations, adding that it was able to collect almost $200 million in fees by failing to properly value the assets in the funds through the methodology described to investors.”  Today, Ms. Tilton fired back with a complaint drafted by Skadden and filed in the S.D.N.Y., claiming that the use of ALJs is unconstitutional.  See Lynn Tilton et al v SEC.  Among other things, her action against the SEC asserts that: “SEC ALJs have not been appointed by the SEC Commissioners, as the Constitution requires. And SEC ALJs enjoy at least two – and likely more – layers of tenure protection. The SEC administrative proceedings therefore violate Article II and are unconstitutional.”  The order instituting the SEC action, and Ms. Tilton’s complaint are linked to above.