The eccentric private equity executive Lynn Tilton is being hit with federal fraud charges. The Securities and Exchange Commission on Monday accused Tilton and her firm Patriarch Partners of misleading investors by overstating the value of firms under the company's management. 

The SEC alleges that Tilton and Patriarch collected nearly $200 million in fees by misreporting the company's underlying loan assets.

Founded in 2000, the Manhattan-based Patriarch raises money from investors in order to make loans to distressed companies. Investors buy into the deals through so-called collateralized loan obligations, which have received AAA credit-agency ratings. These products promise instititutional investors the opportunity to share in the profits when underlying firms turn toward profitability. 

The funds in question, called Zohar I, II and III, totaled more than $2.5 billion in investments. Contracts stipulated that Patriarch would perform objective analyses to value its underlying companies, the SEC said. Fees investors paid to Patriarch were based on how well its loans to struggling companies were doing.

But according to the SEC lawsuit, the valuations reported in Patriarch's monthly filings were based on Tilton's whims and often hid poor performance. Some companies in Patriarch's portfolio, the SEC said, had failed to return as much as 90 percent of interest they owed Zohar, yet still received the firm's highest rating. 

Tilton, 55, has cultivated a striking public image. She estimates her wealth at over $1 billion and claims to have more employees under her than any other woman in the U.S. Once slated to star in a reality television show called "Diva of Distressed," Tilton has been accused by former employees of extreme and abusive management methods. 

Patriarch has promised to fight the charges.