October 23, 2016

Tilton, Patriarch Ask Appeals Court To Nix Fraud Claim

Law360, New York (October 20, 2016, 8:25 PM EDT)

Lynn Tilton and Patriarch Partners LLC told a New York state appeals court Thursday that Norddeutsche Landesbank Girozentrale’s $45 million fraudulent misrepresentation suit should be dismissed because documents describing the collateralized debt obligation investments explicitly said they would acquire equity as well….

Representing Nord/LB, Michael M. Fay of Berg & Androphy said Tilton “got cheap money” and used it to engage in risky business for her own profit. He said Tilton assured investors that she had a “patented strategy” to
make money.

“What she didn’t say is, ‘I’m going out to buy companies with your money,’” Fay said.

He said the core misrepresentation is the bank was told it would be investing in debt, not equity. And, he said, the companies were bought through leveraged buyouts.

“It’s not a good capital structure for a company — all debt,” he said….

The SEC allegations, however, “are the tip of the fraudulent ‘iceberg’ that defendants have perpetrated and
continue to perpetrate,” Nord/LB says in its complaint. It says that investigations of the portfolio companies that
formed the basis for the SEC order revealed other wrongdoing.

In March, New York Supreme Court Judge Eileen Bransten refused to dismiss the bank’s central claim for
fraudulent misrepresentation and concealment, rebuffing Tilton’s argument that Nord/LB failed to allege any
actionable misstatements or omissions that it relied upon.

“The complaint sufficiently alleges that several misrepresentations were made in the [CDO] offering documents
as well as marketing materials put out by the defendants,” Judge Bransten said, ruling from the bench.

Nord/LB is represented by David Berg, Michael M. Fay and Jenny H. Kim of Berg & Androphy.

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