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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.
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.
It’s not at all clear whether the sale of the Lakers will have any effect on the ongoing investigations. Neither Walter nor his companies have been charged with any 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.”
“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.
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.
After receiving federal grand jury subpoenas in February, Delaware Life and Clear Spring Life and Annuity conducted internal investigations. They found that $21 billion in loans they made should have been recorded as extended to “related 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. Related-party transactions can 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. The Times has reported he tapped the insurers he owned for financing, a deal that was later vetted by state insurance 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. The credit rating outfit said that is the most of any North American life insurers it reviews.
The companies backed by the owner of the Dodgers may have failed to disclose loans properly.
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.
