Mark Walter, owner of the Los Angeles Dodgers and Lakers, is reportedly under investigation by federal prosecutors and securities regulators for potential financial improprieties involving $16 billion in undisclosed loans. According to a report by The Wall Street Journal, the loans were issued by two Delaware life insurers owned by Walter and were directed to companies tied to him or his holding company, TWG Global. These transactions were allegedly not disclosed as "related party" dealings, which is a requirement to prevent conflicts of interest and protect policyholders.

Walter, who is also the CEO of Guggenheim Partners, led the acquisition of the Dodgers in 2012 and recently acquired a controlling stake in the Lakers. His insurance-backed deals have been instrumental in these high-profile purchases. The investigation, which began following a whistleblower complaint, is examining whether the loans, which passed through a third party, constitute fraud. The insurers involved, Delaware Life Insurance and Clear Spring Life and Annuity, have admitted to errors in their financial disclosures, initially reporting only $1 billion in related-party exposure, which was later revised to $16 billion.

The investigation poses a significant threat to Walter's business empire, which also includes ownership of Chelsea Football Club and the Professional Women's Hockey League. Despite the ongoing probe, no charges have been filed against Walter, and his company maintains that they have acted in good faith and are cooperating with authorities. The Securities and Exchange Commission is conducting a parallel investigation, and the outcome remains uncertain.

The timing of the investigation is particularly awkward for the NBA, which approved Walter's $10 billion purchase of the Lakers last year. The financial scrutiny could impact Walter's ability to continue his investment strategy, which has significantly influenced the success of the Dodgers and Lakers.

The insurers are now working to restructure the loans and improve their internal controls. Meanwhile, S&P Global Ratings has downgraded its outlook on Delaware Life due to potential increased credit risk.

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Leland Conway