What’s at stake for Dodgers’ owner Mark Walter as authorities probe his businesses
-
Click here to listen to this article -
- Mark Walter, Dodgers majority and Lakers controlling owner, sold the basketball franchise for $12.5 billion amid a federal probe into his insurance businesses.
asserted
Walter → ’ → businesses
- Two Delaware life insurers controlled by Walter have restated $21 billion in loans as related-party transactions that are the focus of parallel criminal and SEC investigations.
asserted
that → control → investigations
- It’s not clear whether the sale of the Lakers will have any effect on the ongoing investigations.
asserted
sale → ’ → investigations
Neither Walter nor his companies have been charged with any crimes.
asserted
Walter → charge → crimes
When Mark Walter, the Lakers controlling owner, flipped the storied team last week for $12.5 billion amid a federal probe of his businesses, it stunned the sports world but seemed to make financial and legal sense.
The Dodgers majority owner, who had bought his stake in the basketball team last year at a $10-billion valuation, likely netted a big payday from the sale to former Disney Chief Executive Bob Iger and venture capitalist Joshua Kushner.
asserted
who → control → Iger
And that’s money the billionaire can apply to pay down the debts of two troubled Delaware life insurers he owns that are under federal scrutiny.
asserted
that → ’ → scrutiny
It’s not at all clear whether the sale of the Lakers will have any effect on the ongoing investigations.
asserted
sale → ’ → investigations
Neither Walter nor his companies have been charged with any crimes.
asserted
Walter → charge → crimes
TWG Global, Walter’s holding company, did not respond to a request for comment Friday, but a spokesperson for the company has previously stated that they are cooperating with authorities and expect the matter to be resolved “favorably.”
asserted
matter → hold → authorities
“Mark Walter and TWG have always acted in good faith, and those who have done business with Mark know him as honest and straightforward,” the statement said.
asserted
statement → act → him
Joshua Kushner and Bob Iger were eyeing an NBA expansion team bid in Las Vegas but pivoted to buying the Lakers from Mark Walter, who bought a controlling interest in the team last year.
asserted
who → eye → team
After receiving federal grand jury subpoenas in February, Delaware Life and Clear Spring Life and Annuity conducted internal investigations.
asserted
Life → receive → investigations
They found that $21 billion in loans they made should have been recorded as extended to “related parties.”
asserted
they → find → parties
Related parties have business or personal ties and transactions between them can have legitimate reasons, but they also pose potential conflicts of interest and require disclosure and typically extra regulatory scrutiny.
In the case of insurers, which hold premium dollars from policyholders for future claims payouts, regulators want to ensure the money is there when it’s needed.
uncertain
it → have → payouts
Related-party transactions can threaten that.
asserted
transactions → threaten → that
Walter, 66, chief executive of Chicago investment firm Guggenheim Partners, led a group that included another Guggenheim executive and Magic Johnson in acquiring the Dodgers for $2.15 billion in 2012.
asserted
that → lead → 2012
The Times has reported he tapped the insurers he owned for financing, a deal that was later vetted by state insurance regulators.
asserted
that → report → regulators
However, the amount of related-party loans made by the two affiliated life insurers now under federal scrutiny is vastly more, amounting to 40% of the invested assets of Delaware Life as of Dec. 31, according to Fitch Ratings.
uncertain
amount → relate → Ratings
The credit rating outfit said that is the most of any North American life insurers it reviews.
asserted
it → say → insurers
It’s unclear exactly where all the money went, but the Wall Street Journal reported billions were passed through a third party before being received by entities tied to Walter or his TWG Global holding company.
uncertain
billions → ’ → Walter
Company executives also told Fitch that they were unaware they were making related-party loans.
asserted
they → tell → loans
Bloomberg reported that investigators are looking at some loans made to multiple companies affiliated with one Chicago firm to see if they were passed along to Walter’s ventures.
asserted
they → report → ventures
In June regulatory filings that disclosed the $21 billion in restatements, each insurer labeled them as “corrections of errors,” which would imply that they were inadvertent.
asserted
they → disclose → errors
Jacob Frenkel, a former U.S. attorney, said it appears clear a focus of the investigation into Walter’s businesses is to determine whether the restatements were just errors.
“If there is intentional concealment of related-party transactions or the creation of intermediaries to help with that concealment, that certainly [could] invite criminal and civil enforcement scrutiny,” said Frenkel, who prosecuted financial crimes and also worked for the Securities and Exchange Commission.
uncertain
who → say → Commission
Authorities have seized Walter’s cellphone and laptop, according to Bloomberg.
uncertain
Authorities → seize → Bloomberg
Still, investigations by prosecutors and securities regulators can result in no action.
asserted
investigations → result → action
Federal authorities are investigating billions in related-party loans made by two insurers owned by Mark Walter reportedly to entities associated with him or his holding company.
uncertain
authorities → investigate → him
Frenkel said that if criminality is found in complex investigations such as this one, federal prosecutors will typically file mail or wire fraud charges that carry up to 20 years in prison.
asserted
that → say → prison
It would not matter whether a company that was the victim of fraudulent conduct closed or is able to continue conducting business after being rescued financially.
asserted
that → matter → business
“The entity’s failure is not a prerequisite for there to be a crime in intentionally misleading conduct,” he said.
asserted
he → mislead → conduct
The Securities and Exchange Commission is conducting a parallel investigation into both companies, according to their regulatory filings.
uncertain
Commission → conduct → filings
Frenkel said its interest could revolve around how Guggenheim Investments, Walter’s asset management firm, booked revenue from its dealings with the insurers and the disclosures of the transactions.
uncertain
Investments → say → transactions
The SEC can seek civil monetary penalties and the return of illegal profits, and bar or suspend an individual from serving as a corporate officer or director, among other remedies.
Delaware Life and Clear Spring are part of TWG’s Group 1001 Life & Annuity.
asserted
Life → seek → Life
Delaware Life has started a remediation plan to restructure some of the loans, review others and address its “control deficiencies,” including through TWG purchasing some of the loans, according to ratings outfit S&P Global.
uncertain
TWG → start → Global
It hopes to complete the plan by the end of the year.
asserted
It → hop → year
However, Fitch in its downgrade of Delaware Life said the plan may prove “insufficient to fully address governance, reporting, and investment oversight issues.”
uncertain
plan → say → issues
The Delaware Department of Insurance did not respond to emails for comment.
asserted
Department → respond → comment
The lightning-quick sale of the Lakers to Bob Iger and Joshua Kushner comes as Mark Walter faces federal probes into allegedly conflicted insurance loans.
Rex Frazier, a former deputy commissioner at the California Department of Insurance, said that in the situation that the insurers find themselves, the state regulator will be looking at a company’s capital sufficiency.
uncertain
regulator → come → sufficiency
“The change from unaffiliated to affiliated transactions can affect the regulator’s view of whether the insurers have adequate capital and, if the regulator thinks not, then the regulator can impose additional capital requirements,” said Frazier, now president of the Personal Insurance Federation of California, a property and casualty industry trade group.
asserted
Frazier → affect → California
“If the regulator determines that there is inadequate capital to pay for their obligations ... there are many serious remedies they can take to protect vulnerable people depending on those income streams,” he said, including seizing a company or forcing its sale.
asserted
he → determine → sale
…and 9 more, not listed.
