Judge Orders Tilton's Patriarch Partners to Produce Zohar Documents

Oct 26 2016 | 9:19pm ET

By Tom Hals (Reuters) - A Delaware judge on Wednesday ordered Lynn Tilton's Patriarch Partners to turn over documents detailing the complex holdings of $2.5 billion distressed debt funds that the embattled investor lost control of this year.

Tilton created the loan vehicles known as the Zohar funds more than a decade ago. The three funds have financed her investments in ailing companies such as Dura Automotive Systems, earning her the title of "Diva of Distressed."

However, one of the Zohar funds defaulted last year and Tilton's Patriarch Partners investment firm stepped down as the collateral manager and was replaced by restructuring firm Alvarez & Marsal in March.

Alvarez sued Patriarch earlier this year and alleged it had not turned over documents required to assess the Zohar collateral.

Alvarez's lawyer said during an August trial that Tilton was playing a "shell game" with valuable assets, while Tilton insisted that Alvarez had every document needed to manage the Zohar collateral.

Vice Chancellor Joseph Slights determined that Patriarch was obligated to produce the documents sought by Alvarez.

"The collection and production of these documents will no doubt place a burden, perhaps even a significant one, on Patriarch," wrote Slights in a 51-page opinion.

However, Slights added that Patriarch enjoyed the benefits of being the Zohar collateral manager for years and always knew it faced substantial obligations if its services came to an end.

A spokeswoman for Tilton did not immediately respond to an email seeking comment.

The judge also said he was fully aware the litigation was driven by wider aims of the parties. He said Patriarch believed the Zohar funds were acting on behalf of the MBIA Insurance Corp, which is seeking to push responsibility for an impending Zohar default onto Patriarch.

The judge said the Zohar funds believed Patriarch was trying to conceal Tilton's conflicting roles during her management of the Zohar funds. The judge said he was not expressing a view on those allegations.

Tilton began defending herself at trial this week against a fraud lawsuit brought by the Securities and Exchange Commission. The regulator has accused Patriarch of hiding the poor performance of assets underlying the Zohar funds and allegedly collected nearly $200 million in improper fees.

In Depth

Q&A: Star Mountain's Brett Hickey On Investing In 'The Growth Engine Of America'

Sep 22 2017 | 5:06pm ET

Lower middle-market companies form the economic fabric of the nation, but they can...


CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Don’t Overlook These 6 Hybrid Cloud Concerns

Sep 14 2017 | 6:27pm ET

Cloud-based technology solutions have made tremendous inroads into the alternative...


From the current issue of

Business Insider has been reporting on the unusual trading activity of a mystery trader who placed a profitable short equity bet to the tune of $21 million on the Aug. 10 move in the CBOE Volatility Index (VIX).