Patriarch Partners founder Lynn Tilton is taking the next steps in her lawsuit against the US Securities and Exchange Commission (SEC), attempting to stop the SEC’s home court administrative proceedings before the agency can bring a fraud case against her firm.
The SEC has assigned an administrative law judge (ALJ) to Tilton’s case, despite her lawsuit questioning the constitutionality of the appointment process for the commission’s in-house judges. ALJ Carol Foelek will preside at the administrative hearing, which is to be scheduled by May. Tilton is attempting to halt the proceedings before then by holding her civil hearing on May 11, according to a filing in Manhattan district court.
In the meantime, Tilton is dealing with another scandal – a former Patriarch senior vice president pled guilty to ethics charges in an Alabama federal court on Wednesday. Norbert Vergez, a retired US Army colonel, started at Patriarch as a senior advisor to portfolio company MD Helicopters in 2012. While negotiating for the job, Vergez took steps to ensure the company would receive faster payment by the Department of Defense.
Vergez is also charged with failing to disclose receiving $30,000 from Patriarch for relocation expenses and making a false statement to the Defense Department's inspector general during a 2012 audit. He is scheduled to appear in court on April 16, and faces up to five years in prison on each of three counts of making false statements and felony conflict of interest.
The SEC brought fraud charges against Patriarch last week for using discretionary valuation practices in three collateralized loan obligation funds. When the commission decided to try Tilton before an ALJ rather than in US District Court, Tilton filed a lawsuit claiming that the SEC’s ALJ appointment process violates Article II of the US Constitution.