She seems to have come out of nowhere. Go to her website. You’ll learn that she’s a fiercely smart, Yale-educated, hardworking single mom who busted her chops on Wall Street. Then she went off on her own, becoming a rare phenomenon: a female chief of a private equity firm, whose success has turned her into a very wealthy woman. “There’s no question that I’m a billionaire,” she assured me.  Talk to former employees, and you sometimes get a very a different story. They speak in whispers of a “terrifying” and “evil” boss, given to eruptions of rage, who exploits her femininity to throw off men, who threw herself a 50th birthday party where staffers did jello shots off her stomach and chest. When we asked her about these personal allegations, a spokesman wrote back, “We will not respond to anonymous, vague, deliberate and frankly sexist attempts to impugn Ms. Tilton’s personal and professional reputation.”  Who is Lynn Tilton? There’s no simple answer.  Back in January, I set out to discover more about the private-equity impresario in order to see if she qualified for our Billionaires’ List. I ended up with a lot more—a warning to “tread lightly,” threats from Tilton’s lawyers to stop pursuing certain angles, hang-ups or frightened responses from people I called to learn more about her. Her attorneys sent several letters to FORBES threatening litigation before we’d published a word.  I was first spurred on, in part, by a flattering profile of her in the Wall Street Journal, which reported that Tilton controls companies with 120,000 employees and sales exceeding $8 billion. Her own website says she has owned 150 companies and saved 250,000 jobs since 2000. The story never quite said she was a billionaire, though it suggested she’d gotten very rich from buying up distressed industrial companies no one else seemed to want via her firm, Patriarch Partners. It also suggested an intriguingly salty side of Tilton: a demonically hard worker who wore provocative clothing and enough jewelry to make a tsarina envious (her collection is worth $25 million).  After my first call to Patriarch, the firm sounded excited to talk and within 48 hours I was on the phone with Tilton and one of her managing directors, Randy Jones, who referred to her as “the richest self-made woman in America.” (Just for comparison’s sake, Oprah Winfrey is worth $2.7 billion.) I let them know what kinds of financial documents I needed to see, and we set up an interview for 12 days later.  Looking into Tilton, I quickly discovered that ever since the recession, she’s been all over the business channels—CNBC, Fox, Bloomberg TV, where she is sometimes introduced as “the self-made billionaire.” In good Trump fashion, she has a reality show about her business (“Diva of Distressed”) in the works with the Sundance Channel. She has also taken out full-page ads in the New York Times and Washington Post and contributed op-eds to the Huffington Post about the need to save manufacturing jobs in America. She writes on her Dust to Diamonds blog, tweets from @LynnTilton and updates her 1,500 Facebook followers on her progress (mostly stuff about conferences where she’s speaking or saving American jobs).  My first interview was cordial. Enter her offices on the 17th floor of her downtown Manhattan HQ and you walk into the Lynn Tilton show. A life-size cardboard cutout of Tilton greets you at the door; photos of her at different companies line a side table; a giant close up of her face stares from the waiting room wall. That was nothing compared to the real woman: Dressed in a fur-lined jacket, a tan miniskirt that rode up her hips and suede boots with 5-inch heels, Tilton sported a diamond ring about the size of a cherry and huge dangling diamond earrings that flashed when she flicked her bleach-blond hair worn waist-length.  Over the next hour or so, she showed me a statement from her accountant, Anchin, Block & Anchin, of private assets like gold and cash (totaling $544 million), and flipped through estimated values of some of her portfolio companies. Toward the end, Tilton gave me a tour of the offices. Outside her suite are handcuffs, whip and cowboy hat–emblematic, she says, of her kicking companies into shape.  When I asked Randy Jones for the names of people to call, he gave me the number of Patriarch managing director Charles Sweet, who has worked for Tilton for seven years. As a higher up, I figured Sweet would know something about Patriarch’s financing. But when I got him on the phone and asked him about the intricacies of Tilton’s business model, he said, “Only Lynn knows.”  I found that odd, but started digging up other people in her sphere to call. Among them was Jeff Stafeil, CEO of Dura Automotive, a car parts company in Patriarch’s portfolio. Could they enlighten me about her business model? Word of that call got back to Tilton. “When you talk to people at companies, they’re not going to understand the financing behind the structure,” she later told me. “Like a Jeff Stafeil runs the auto platform, he doesn’t worry about it except that he’s got the money.”  How does Tilton come to own and finance pieces of 74 companies, including Stila Cosmetics, Howard Hughes-founded MD Helicopters and map maker Rand McNally? Through structured financial vehicles. Patriarch has picked up the distressed debt of dozens of enterprises across the country and re-bundled them into so-called collateralized debt obligations (CDOs). Traditionally, CDOs have tended to buy assets at par and use the cash flows to pay debt and equity investors. The debt holders and management get paid first from the cash flows; whatever excess remains goes to the equity investors.  But Tilton’s structured vehicles are different from traditional CDOs. In fact, she patented them. Tilton says she packs in distressed assets for which she paid an average of around 50 cents on the dollar. Some of the assets, she admits, have defaulted. But, in the aggregate, Tilton says her CDOs have enjoyed significant appreciation as the assets she bought recovered to par or, in some cases, exceeded it in value. Tilton says she enjoys another advantage: With the conventional vehicle, when an asset defaults, the CDO manager is obliged to unload it from the portfolio, often at a fire-sale price. That’s what happened with many CDOs in 2007 and 2008. Tilton says her CDOs are structured so that they don’t have to sell either defaulted or low-rated assets—and can, instead, wait up to 15 years for them to recover.  Tilton also gets income from fees by serving as collateral manager of Patriarch funds and other funds and, to the extent she holds equity, from the proceeds of company sales.  But what does it all add up to? There are billions of investor dollars at stake–and her outstanding CDOs have been downgraded.  Trying to understand how it all works, I called a lot of people who know or have worked with Tilton. Some of them hung up on me, would talk only on background or hinted that she was hiding something. Randy Jones phoned me to tell me “tread lightly,” and to say that the second interview was canceled.  Then, suddenly, it was back on. In my second sit-down, I asked Tilton more questions about CDOs. Who were the investors? Did banks lend to the companies? How exactly did these things work? Tilton drew boxes, referred to her patent and did a lot of eye-rolling. At one point she asked Randy Jones, “Do you understand what I’m saying?”  “I’m getting it,” he answered, a little uncertainly. By this time the boxes she had scribbled were indecipherable.  After two hours, Tilton could barely contain her exasperation with my questions. “I’m not here for you to scrutinize. . . . I’ve given you more information than I’ve given to anyone,” she said. “I have never wanted to be defined by my wealth,” she told me before cutting off the interview.  Who is Lynn Tilton? The more you find out, the more questions bubble up.  Tilton is a self-promoter, but doesn’t like unwanted attention. She claims to be very open and to hide nothing, but tried to control my reporting and warned ex-employees not to talk to me (or risk being sued for breaking their non-disclosure agreements). She bills herself as a turnaround savior, on a mission to save manufacturing jobs in America, but concedes that she has forced companies into bankruptcy and pushed some services overseas.  An unusual subject demands an unusual approach to reporting.  Over the next several days, you will find out much more about her and how she conducts her businesses. Check out the story from my editor, Tom Post, about Tilton’s legal battles. Read the post by Matt Schifrin, who oversees Forbes’ investing and markets coverage, on Patriarch’s complicated financial model—and why her funds are getting downgraded. Later on, executive editor Neil Weinberg will weigh in about the big, bad market for CDOs. And in the days ahead, you’ll hear from me about the mixed record of Tilton’s companies, and her colorful life as an entrepreneur. You’ll also hear from Tilton and her lawyers.  Lynn Tilton: Keeping Her Lawyers On Speed Dial  Lynn Tilton: Court Docs Reveal Accusations Of Fraud  Lynn Tilton: Diva In Distress?  Five Things Investors Should Know About Lynn Tilton’s CLO Deals  Lynn Tilton: In Her Own Words
The colorful private-equity CEO claims to be a billionaire. When we tried to confirm that, things got ugly.