The Securities and Exchange Commission has charged Lynn Tilton and her Patriarch Partners firms with fraud, the agency said Monday. Tilton and her firms breached their fiduciary duties and defrauded clients by failing to value assets using methodology described to investors in offering documents from three collateralized loan obgliation funds they manage, the SEC said. Tilton violated her duty to clients when she exercised "subjective discretion over valuation levels, creating a major conflict of interest that was never disclosed to them," the agency's enforcement director said. In a statement, Patriarch Partners said it was "disappointed that the SEC has chosen to bring an enforcement action that is ill founded and at odds with Patriarch's investment strategy, which was consistently disclosed since the inception of the funds." The company added: "We look forward to the opportunity to vigorously defend ourselves against the SEC's allegations." (Updates with statement from Patriarch Partners.)
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