“The life insurance industry has been a smug sacred cow feeding the public a steady line of sacred bull.” – Ralph Nader
Mark Walter apparently figured out that if you own a life insurance company, you can lend its billions to other companies you control.
Never mind the risks to the widows and orphans who will be due payouts in the future. Use their money to build a professional sports empire. They get the risks. You get the teams.
It’s not necessarily illegal for an insurer to invest in affiliated companies. But regulators want to know about it. The greater the concentration and conflicts of interest, the greater the risk to policyholders.
Case in point: Martin R. “Marty” Frankel. He created a fake trust in the 1990s, acquired struggling life insurance companies in its name, and looted more than $200 million from their reserves in the biggest insurance fraud of its time.
Read More: Martin Frankel – Thunor Trust (Business Blunders Hall Of Shame)
Walter’s case isn’t like Frankel’s. Nobody is accusing him of outright looting his insurers. So far, federal investigators are merely probing billions in affiliated deals routed through a complex web of companies.
Legal or not, this is why Walter is in a mad scramble to raise cash.
One of Walter’s companies, Delaware Life Insurance Co., disclosed that it only had 3% of its assets tied up in affiliated investments.
Then investigators started sniffing around.
Whoops. Sorry. Make that 42%.
This is no small rounding error.
Another company, Clear Spring Life & Annuity Co. has a similar problem. Combined the two insurers together have had to reclassify more than $20 billion as affiliate investments.
So now Walter’s empire needs money to replace those investments with something other than a heart-shaped box of sweetheart deals.
Walter has agreed to sell his controlling stake in the Los Angeles Lakers to former Disney CEO Bob Iger and venture capitalist Josh Kushner, brother of Trump's son-in-law Jared Kushner, in a deal valuing the team at $12.5 billion. Some are questioning whether it’s an Iger-Kushner bailout.
Walter has controlled the Lakers for all of 14 months. He bought it at a $10 billion valuation. Now he’s flipping the team for $2.5 billion more.
So much for building a dynasty.
Investigators are probing and subpoenas are flying. The Manhattan U.S. Attorney’s Office and the Securities and Exchange Commission are all over this case but so far no charges or regulatory complaints have been filed.
Walter's sprawling empire includes stakes in the L.A. Dodgers, WNBA's Los Angeles Sparks and Cadillac Formula 1 team.
The Arena Curse
Walter’s insurance empire also includes Gainbridge, which in 2021 put its name on the arena where the Indiana Pacers play. This is never a good sign.
“The Arena Curse strikes again and this time it’s the arena the Indianapolis Pacers call home,” fellow Substack writer Herb Greenberg reminded me in a note last week.
Remember Enron Field? The Adelphia Coliseum? Or more recently, the FTX Arena?
Gainbridge Fieldhouse used to be called Conseco Fieldhouse.
Conseco went bankrupt.
Then it was called Bankers Life Fieldhouse.
Bankers Life was placed into court-ordered liquidation.
Now it’s Gainbridge Fieldhouse.
Call me superstitious, but I think the Arena Curse is real.
