Entrepreneur Tilton Cleared of SEC Fraud Charges

Lynn Tilton, the flamboyant turnaround queen of ailing companies, has prevailed in a U.S. Securities and Exchange Commission trial that accused her of fraud.

SEC administrative law judge Carol Foelak dismissed the commission’s complaint, saying the charges it leveled were “unproven.” Foelak ruled that Tilton did not conceal key information about loans and interest rates from investors.

Sometimes described as the “diva of distressed,” Tilton is owner and CEO of Dura Automotive Systems LLC, a metro Detroit-based supplier of vehicle latches and other components. Her Patriarch Partners LLC firm claims to have invested in and revived 243 companies since 2000.

Patriarch manages funds that invest in companies Tilton owns. After investigating her for five years, the SEC sued her in 2012. The commission claimed that Tilton had defrauded investors by misrepresenting the financial strength of her companies so that she could charge investors higher management fees. The commission demanded that she return more than $200 million in overcharges.

Tilton countersued the SEC in 2013, claiming its in-house proceeding would violate her constitutional right to a trial. But a federal judge ruled that Tilton couldn’t sue until she completed the SEC’s administrative process.