MBIA not only shared information with the SEC that it gleaned during discussions to restructure one fund but was given confidential documents Patriarch provided during the probe against SEC policy, Tilton contends.
As a result, rather than go through with the restructuring, MBIA chose to litigate to get control of the fund's collateral, with the SEC's approval to use the confidential documents so long as its "fingerprints were never revealed," Tilton's lawyers wrote.
Randy Mastro, Tilton's lawyer, at a hearing on Wednesday said the SEC and MBIA entered into "an unholy alliance where rules were broken."
The SEC has said sharing the documents was permitted. MBIA had no comment.
The U.S. Supreme Court on Sept. 27 rejected Tilton's bid to avoid Monday's SEC action.
This article was provided by Reuters.