Lynn Tilton shot back at U.S. regulators Wednesday, claiming their pursuit of fraud claims against her and her firm Patriarch Partners violates the Constitution.

Tilton and her firm sued the Securities and Exchange Commission in Manhattan federal court two days after the agency accused them of misleading investors about the value of risky pools of corporate loans. She is seeking to block the agency from pursuing its case in administrative court, where there’s no jury and discovery is limited.

The SEC’s use of administrative proceedings for enforcement actions has drawn increasing scrutiny from securities lawyers in recent months. Critics of the process say it is unfair because the judges are hand-picked by the SEC, and defendants don’t have the same opportunity to uncover evidence in their favor as they would in a federal court proceeding.

Tilton’s lawsuit echoed previous challenges to the SEC’s proceedings, arguing that they violate the separation of powers required by the Constitution because the judges are too far removed from presidential supervision.

Judy Burns, a spokeswoman for the SEC, declined to comment about Tilton’s claims.

Tilton, speaking in an interview Wednesday on CNBC, said she is “baffled” by the SEC’s decision to bring the enforcement action and that the agency “completely misunderstood” her business.

Tilton and Patriarch reported the value of the underlying loans as unchanged even though many of the companies have made partial or no interest payments for years to funds clients invested in, the SEC said in a statement Monday. The SEC said Tilton and Patriarch collected $200 million of payments to which they weren’t entitled.

The SEC action could hurt a business empire the 55-year-old Tilton built by selling structured finance bonds before the market for such debt blew up in the 2008 financial crisis. Once known as the “Diva of Distressed,” Tilton gained notoriety over the years for her brash management style, once explaining that she only stripped and flipped men -- not her companies.

In the lawsuit, Tilton said that she and her firm perform a sensitive role managing investment funds and deeply distressed debt. She said that if the SEC is allowed to proceed, the damage to the funds could be irreversible.

In a letter to investors in February, Patriarch said had used a conservative methodology to value the loans.

The case is: Lynn Tilton v. Securities and Exchange Commission, 15-CV-2472, U.S. District Court, Southern District of New York (Manhattan).

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