Financier Tilton defeats lawsuit by Zohar funds she founded

From Reuters - December 29, 2017

NEW YORK (Reuters) - Lynn Tilton, the colorful New York financier recently cleared of wrongdoing in a U.S. Securities & Exchange Commission fraud case, won another legal victory on Friday as a federal judge dismissed a racketeering lawsuit by the Zohar investment funds she once managed.

U.S. District Judge William Pauley in Manhattan said the alleged misconduct by Tilton and her firm Patriarch Partners runs headlong into a Congressional ban on civil racketeering claims predicated on the purchase or sale of securities.

The three Zohar funds had accused Tilton and Patriarch of pilfering more than $1 billion of cash and other assets through a toxic mix of fraud, theft, and mismanagement, leaving the funds unable to meet obligations to their investors.

In his 36-page decision, Pauley said much of the alleged looting scheme appeared at least superficially not to involve securities.

But he said an integral component of that scheme included pillaging portfolio companies of their equity, re-directing Zohars equity interests for defendants benefit, and diverting the equity distributions into defendants coffers--all actions coinciding with the purchase or sale of securities.

Pauley also refused to assert jurisdiction over 11 other Zohar claims, noting that the funds had filed a similar lawsuit in Delaware Chancery Court.

Lawyers for the Zohar funds did not immediately respond to requests for comment.

A spokesman for Patriarch said the firm is extremely pleased with the dismissal.


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