The federal probe into Lakers owner Mark Walter’s business empire is raising broader questions about a Wall Street playbook that uses insurance capital to invest in private credit and other alternative assets — a model that later spread across some of the biggest firms in finance.
Federal prosecutors and the Securities and Exchange Commission are examining whether Walter or his companies committed fraud by failing to disclose financial ties while borrowing billions from insurers he controls, according to the Wall Street Journal.
Walter, who is CEO of Guggenheim Partners and owns the Los Angeles Dodgers and Lakers, has not been accused of any crimes. Nor have his businesses.
Investigators have focused on four firms that served as intermediaries between Walter-controlled insurers and other businesses linked to his empire, the Journal reported, citing people familiar with the matter.
The scrutiny could have implications well beyond Walter’s own companies.
The billionaire was an early adopter of a strategy that paired insurance companies — and their vast pools of long-term policyholder capital — with investments in private and illiquid assets, according to the Financial Times.
After the 2008 financial crisis, Walter pushed Guggenheim into buying insurers at bargain prices and deploying billions tied to policyholder obligations into assets offering the prospect of higher returns, the FT reported.
Wall Street giants Apollo, KKR and Brookfield later built large insurance operations of their own, using those balance sheets to finance private-credit investments. Private capital firms now manage more than $1 trillion in insurance assets, according to the FT.
That helps explain why Walter’s troubles are drawing broader attention as regulators increasingly scrutinize private credit, which has grown into a major source of financing outside traditional banks.
In June, two insurers owned by Walter under TWG disclosed that they had failed to identify more than $20 billion in related-party assets, according to the FT.
Derek Reisfield, co-founder and former chairman of MarketWatch, told The Post that the key issue is whether money from Walter-controlled insurers was loaned to businesses connected to the billionaire without required disclosures.
“Tripping over these requirements can constitute fraud,” said Reisfield, a former McKinsey consultant, noting that insurers can face rules governing transactions with related entities.
He said heavy exposure to businesses connected to an insurer’s owner creates another danger.
“The risk is the concentrated loans to related parties go south and the insurance companies and their policy holders can’t be made whole,” Reisfield told The Post. “It’s bad risk management and leaves the companies vulnerable.”
Walter’s insurers are now working to unwind or restructure sizable chunks of their related-party holdings as they seek to avoid ratings downgrades that could weaken their financial standing.
TWG pushed back against suggestions that Walter’s businesses had skirted their obligations.
“We have always acted in good faith, and insinuations that we have in any way attempted to circumvent our obligations is simply false,” a TWG spokesman told the Journal.
“We are proud of the business that we have built and the value we have created for our clients, investors and shareholders.”
Walter, 66, co-founded Guggenheim in 1999 and later built a collection of sports assets alongside his insurance and investment operations.
He took control of the Lakers in a deal valuing the team at roughly $10 billion, only to agree less than a year later to sell the storied franchise to Thrive Capital founder Josh Kushner and former Disney boss Bob Iger at a record $12.5 billion valuation.
The Lakers deal also released collateral Walter had committed to finance his purchase of the team, potentially giving his companies more flexibility as they work through the insurers’ investments, according to the Journal.
The Kushner-Iger offer was not part of Walter’s original plan for addressing the insurers’ regulatory issues, and his companies are still exploring other ways to raise money, the Journal reported.
The Post has sought comment from Walter.