The business empire of Dodgers and Lakers owner Mark Walter reportedly is being probed by the U.S. Attorney’s Office and securities regulators over $16 billion in possibly fraudulent loans.
The loans by two Delaware life insurers that Walter owns were made to companies tied to him or his TWG Global holding company but were not disclosed as “related party” transactions as required, the Wall Street Journal reported Sunday. Related party transactions made by insurers are required to be reported to limit conflicts of interest and protect policyholders, who have an interest in the financial strength of their insurers.
Walter, 66, chief executive of Chicago investment firm Guggenheim Partners, led a group that included Todd Boehly — another Guggenheim executive — and Magic Johnson in acquiring the Dodgers for $2.15 billion in 2012, a record for a pro sports team at the time. Last year, Walter and TWG acquired a controlling stake in the Lakers at a $10 billion valuation, a new record. Walter also owns the Chelsea soccer team in the English Premier League.
Last week, the financial and sports mogul celebrated the Dodgers’ World Series victory at the White House. It was the second time in two years, following back-to-back World Series wins.
The majority of the money used to buy the Dodgers — more than $1 billion — came from insurance companies managed by Guggenheim Partners and controlled by Walter, the Times has reported.
A number of state insurance regulators investigated the purchase in 2014 and found no irregularities, the Wall Street Journal reported in 2020.
Guggenheim Partners got into the insurance business after America’s 2008 financial crisis, spotting investment opportunities. Walter figured he could increase the returns insurers got on their typical purchases of corporate bonds by connecting them to his deal pipeline, according to the Wall Street Journal, which found that five insurers had provided more than $10 billion in deal funding over the years.
The current probe began after an internal whistleblower filed a complaint questioning the way Walter’s asset-management firm, Guggenheim Investments, booked revenue associated with insurers, the Journal reported this week, and FBI agents seized at least one cellphone related to that probe.
The investigation then spread to examining $16 billion in loans, which were passed through a third party before being received by the companies tied to Walter or TWG, the Journal reported, adding that authorities are trying to determine whether that amounted to fraud, citing an unnamed source.
The insurers, Delaware Life Insurance and its affiliate Clear Spring Life and Annuity, disclosed the investigations in June regulatory filings. Delaware Life, which earlier had stated affiliated investments amounted to only about $1 billion, or 3% of its portfolio, increased that number to $16 billion.
Delaware Life executives told one credit rating firm they were unaware the loans were made to entities tied to Walter, the Journal reported. The companies said they received grand jury subpoenas in February related to an investigation by federal prosecutors in the Southern District of New York and that the Securities and Exchange Commission also is conducting a parallel investigation.
Investigations conducted by prosecutors and securities regulators often result in no action.
The Dodgers, TWG and Guggenheim did not immediately respond to messages for comment.
A TWG spokesperson told the Journal that “Mark Walter and TWG have always acted in good faith,” are cooperating with authorities and are “confident these matters will be resolved favorably.”
After conducting an internal investigation, Delaware Life said it would restructure some related-party loans, address its internal control deficiencies and moderate its business plan, according to S&P Global. While the ratings agency is maintaining its “A-” financial strength and credit ratings of Delaware Life, it reduced its outlook to “negative” because of possible higher credit risk following changes to the insurer’s portfolio.
“In addition, such outcomes could weaken Delaware Life’s regulatory relationships and damage its reputation, which could erode its competitive position,” S&P said.
“Our capital position and liquidity remain strong, and our financial strength ratings are unchanged,” Group 1001, the insurers’ parent company, said in a statement.
“We remain focused on delivering exceptional value and service to our contract and policyholders and their financial representatives,” the statement added.
Bloomberg News contributed to this report.
