SCOTUS Rejects Lynn Tilton's Petition Against SEC ALJ's

May 30 2017 | 9:57pm ET

The United States Supreme Court has refused to hear a petition by Lynn Tilton and her firm Patriarch Partners in a long-running SEC case that put the spotlight on the regulator’s use of administrative law judges.

The SEC trial, which accuses her of improperly disclosing the poor performance of the assets underlying Patriarch’s $2.5 billion Zohar CLO funds and allegedly collecting hundreds of millions in unearned fees as a result, concluded in November of last year and a ruling is expected at any moment, according to Bloomberg. Tilton and Patriarch have denied any wrongdoing. 

In asking the U.S. Supreme Court to look at the case, Tilton argued that the SEC’s use of in-house administrative law judges was both unconstitutional and procedurally prejudicial against defendants. 

While the SEC has increasingly used such in-house judges for enforcement actions instead of federal district courts, the practice has been criticized as a violation of the appointments clause of the U.S. Constitution as well as fundamentally biased, since the plaintiff – in this case the SEC – also employs the judge. 

Tilton’s request to have the matter heard before the U.S. Supreme Court was rejected without comment, leaving in place a U.S. Second Circuit decision that dismissed her lawsuit on jurisdictional grounds. 

If she loses the SEC proceeding, Tilton will have the option of challenging it in federal court, where she has long argued the matter belongs in the first place.

Tilton, dubbed the “Diva of Distressed, became one of Wall Street’s best-known turnaround specialists in the years since Patriarch was founded in 2000, restructuring more than 240 companies, according to the firm’s web site. 

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