Aug 17 (Reuters) – U.S. federal prosecutors looking into billionaire Mark Walter’s empire are focused on four businesses that served as intermediaries between insurance companies he controlled, the Wall Street Journal reported on Sunday.
The prosecutors and the Securities and Exchange Commission are investigating whether Walter or his businesses committed fraud by concealing financial connections while borrowing billions of dollars from insurers he controls, the report said, citing people familiar with the matter.
Walter’s holding company TWG did not immediately respond to a Reuters request for comment. The SEC declined to comment. Reuters could not independently verify the report.
The proceeds from the loans made by the insurers passed through entities purportedly controlled by the four firms under the scanner before being used to fund other Walter-linked businesses, the report said, adding that Walter and his businesses haven’t been accused of any crimes.
Bloomberg News reported last week that Walter had offered to pledge his equity stake in Guggenheim Partners as part of a broader effort to raise billions of dollars in a bid to clean up loans on the balance sheet of its insurance companies, Delaware Life Insurance Company and Clear Spring Life and Annuity Company.
In February, Delaware Life Insurance Company and its affiliate, Clear Spring Life and Annuity Company, received grand jury subpoenas in connection with an investigation being conducted by the U.S. Attorney’s Office for the Southern District of New York, while the SEC was also conducting a parallel investigation, according to a regulatory filing.
The investigation is focused on whether certain private credit investments introduced to Delaware Life and Clear Spring should have been treated as affiliated or related-party transactions, according to the filing.
After receiving the subpoenas, Delaware Life initiated an internal investigation to review its affiliated and related-party disclosures and found errors relating to the identification and presentation of certain related-party investments.
Fitch Ratings last month placed Delaware Life’s ratings on “negative watch” following the firm’s release of restated financial statements that reclassified a large volume of private credit investments as affiliated or related-party assets.
The restated financial statements increased affiliated investments to about 40% of cash and invested assets from less than 5%, according to Fitch.
Walter is CEO of Guggenheim Partners, the parent company of Guggenheim Securities, the firm’s brokerage, and Guggenheim Investments, its money manager.
Walter also struck an agreement to sell the Los Angeles Lakers to venture capitalist Joshua Kushner and former Disney CEO Bob Iger at a record $12.5 billion, Reuters reported last week, just over a year after he bought a majority stake in the NBA team.
(Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Devika Syamnath)