Deal pros will often argue valuations are more art than science. This will likely be at least part of the defense used by Brantley Capital Management’s Robert Pinkas and former Brantley executive Tab Keplinger, who in the second week of August, were charged by the Securities and Exchange Commission for overstating the value of certain portfolio companies.

Specifically, the SEC charged the pair with misrepresenting the valuations of two businesses owned by Brantley Capital, the firm’s affiliated business development company (BDC). Allegedly, Pinkas and Keplinger overstated the value of Flight Options International and Disposable Products Company, investments made by the firm that go back to 2002 and 1998, respectively.

Brantley’s valuation guidelines, according to the complaint, stated that the firm would hold an investment at cost “until significant developments or other factors” provided a basis for a new value. The SEC basically claims that Brantley, for the investments in question, took a high-water mark approach, and for the most part only recognized value-improving developments while ignoring certain events that would have chipped away at the companies’ worth. Brantley Capital Management’s 2.85% management fee was applied to the fair value sum of the assets, as opposed to a cost basis, which the SEC says translated into an additional $6.5 million in management fees.

The case, to some degree, underscores an ongoing battle for business development companies. Hedge fund manager David Einhorn’s Greenlight Capital famously shorted and took on BDC Allied Capital, a fight that went on for six years. Einhorn specifically targeted the firm’s valuation of its Business Loan Express investment.

Brantley, meanwhile, has been a fixture in the crosshairs of Bulldog Investors head Phillip Goldstein. Goldstein, who won a board seat at the BDC, has been claiming malfeasance on the part of the Brantley executives since 2002.

Pinkas declined to comment for this story. His attorney, Henry W. Asbill of Dewey & LeBoeuf LLP, issued a statement saying Pinkas is being "unfairly targeted by the SEC."

Meanwhile, in a letter to Brantley's limited partners obtained by Mergers & Acquisitions, Pinkas alluded to the imperfect art of assessing valuations.  "The SEC’s conclusions are baseless, and we have told them so," he wrote. "Valuing private company investments prior to their final disposition, as you all know, necessarily reflects professional judgments."

He noted in the letter that Brantley had been trying to settle with the SEC, but the talks "foundered." Pinkas also alluded to a new fundraising effort for Brantley Partners, a PE fund, adding that all prospective investors in the Fund VI will be fully informed of the case and "our position."