{"text":[[{"start":12,"text":"Mark Walter, a shy Midwesterner trained far from Wall Street, built an investment giant over long years by pioneering a shift by insurance companies in need of higher returns into private investments."}],[{"start":24.2,"text":"It is a trade that helped win $367bn of assets under management for Walter’s Guggenheim Partners and made the billionaire a titan in the world of sport, with stakes in the Los Angeles Lakers basketball team, Chelsea Football Club and baseball’s LA Dodgers."}],[{"start":42.45,"text":"At one point Walter came close to making Guggenheim a higher-octane Wall Street replica of Warren Buffett’s Berkshire Hathaway."}],[{"start":50.1,"text":"But the empire of the 66-year-old Iowa native is unravelling. Federal prosecutors are investigating his business practices in a probe that has revealed how two insurance companies he controlled provided more than $20bn in previously undisclosed financing for dealmaking by other parts of his business empire."}],[{"start":68.5,"text":"Now Walter has agreed to sell the Lakers and put his stake in Chelsea up for sale as he rushes to clean up the balance sheets of the insurance arms of the colossus that he built."}],[{"start":79.95,"text":"What is happening at Guggenheim and TWG, Walter’s holding company, is, in the eyes of many, a symptom of a broader trend — a private capital-inspired bid to increase insurers’ profits by making higher-yielding and riskier investments."}],[{"start":96.30000000000001,"text":"“What makes Mark Walter unique is that he failed to disclose a tremendous amount of affiliated transactions, which have the potential to loot the insurer, for the benefit of his other companies,” says Andrew Granato, a University of Texas law professor. “But other private capital firms are engaged in essentially the same business model.”"}],[{"start":null,"text":"

"}],[{"start":116.05000000000001,"text":"KKR, Apollo and Brookfield have also bought insurers and used them to lend to other firms in their orbit — bringing private credit into a multitrillion-dollar industry. Walter is far from the only figure in the industry who turned himself into a billionaire off the backs of American retirees."}],[{"start":133.65,"text":"Private capital executives “come in and don’t see the reserves insurers are holding as protection for consumers buying the policies — they see it as a pile of money that they can use to make more money”, says a US regulator, who has sought tougher rules on disclosing investments."}],[{"start":148.35,"text":"“They’ve identified things where maybe the industry’s been a little stodgy, but somebody will push it too far.”"}],[{"start":154.79999999999998,"text":"The problems at Guggenheim go back at least a decade, to a power struggle that triggered whistleblower complaints, federal probes and ultimately the current efforts to raise tens of billions of dollars to bail out core businesses."}],[{"start":168.2,"text":"Interviews with more than 20 people involved with Walter and Guggenheim depict a company that blew past concerns raised by its own compliance teams, leading to the disputes that have prevented the company from reaching the financial peaks it has long sought."}],[{"start":182.39999999999998,"text":"“Guggenheim could have been the next Oaktree,” says one former executive, referring to the $200bn Los Angeles credit manager whose founder, Howard Marks, is one of the most respected investors of his generation."}],[{"start":195.2,"text":"By contrast, the FBI seized Walter’s phone and laptop as part of the federal probe last September. On the same day, according to people familiar with the investigation, it impounded the phone of Dina DiLorenzo, the president of Guggenheim Investments."}],[{"start":210.2,"text":"What Walter built"}],[{"start":211.64999999999998,"text":"The empire Walter has amassed is vast even if it has been surpassed by rivals. More than half a million policyholders depend on the returns its insurers have promised to provide."}],[{"start":223.04999999999998,"text":"Veterans of the group say Walter and his co-founders built businesses that were, at their best, the top fixed-income investors in America. "}],[{"start":232.24999999999997,"text":"Walter, a veteran of the unglamorous “commercial paper” marketplace for overnight corporate funding, fuelled his ascent by partnering with well-known names. "}],[{"start":241.64999999999998,"text":"He co-founded Guggenheim Partners in 1999 by merging his niche investment firm with the family office of the Guggenheim family and adopting their name, known widely for endowing New York City’s Guggenheim Museum, for corporate use."}],[{"start":255.99999999999997,"text":"The firm’s late chief investment officer Scott Minerd turned the company’s asset management arm into one of the world’s largest credit managers."}],[{"start":264.95,"text":"In the wake of the financial crisis, Walter and another top Guggenheim executive — Todd Boehly — spotted another avenue to grow the firm. "}],[{"start":273.4,"text":"Historically low interest rates were weighing on life insurance and annuity providers, making it hard for them to earn enough on investments to meet future commitments to policyholders. "}],[{"start":283.84999999999997,"text":"The difference between what insurers could earn holding staid, high-quality corporate and government bonds and what they owed policyholders had crumpled, making their traditional business model all but obsolete."}],[{"start":null,"text":""}],[{"start":295.84999999999997,"text":"Walter saw a pile of capital that could supercharge Guggenheim and pounced, shifting that money into higher-earning private investments, which were relatively untested in the insurance world. Fast-recovering financial markets after the crisis also made windfalls easy to come by."}],[{"start":311.95,"text":"“You had to be an idiot to not make money,” says one former Guggenheim executive of the early 2010s recovery. "}],[{"start":319.25,"text":"But the dealmaking by Walter, Minerd and other top executives rankled compliance officers within the firm who worried its top executives put themselves ahead of clients. "}],[{"start":330.7,"text":"Untangling the corporate structures for the transactions was a Herculean effort, given the proliferation of limited-liability companies."}],[{"start":338.55,"text":"By 2016, a whistleblower within Guggenheim had contacted the US Securities and Exchange Commission, warning of potential self-dealing in a handful of transactions."}],[{"start":349.90000000000003,"text":"Internally, a power struggle was also emerging between Walter and Minerd, exposing cracks within the business. "}],[{"start":356.70000000000005,"text":"Walter’s April 2016 promotion of Alexandra Court, with whom he had a close personal relationship, brought those tensions to a head, setting off a chain of events that rocked Guggenheim. The FT reported on the turmoil at the firm after members of the team she took over were fired within days of her appointment."}],[{"start":375.05000000000007,"text":"Court also temporarily used an $85mn Malibu mansion bought from entertainment mogul David Geffen by ABS Capital, an investment firm tied to Walter and set up by former Guggenheim employees."}],[{"start":387.80000000000007,"text":"At the time she defended her role, while Guggenheim said there was “no non-business relationship” between her and Walter “but if there were, it was fully and promptly disclosed to the appropriate parties at Guggenheim”."}],[{"start":400.50000000000006,"text":"A subsequent FT investigation found that Guggenheim had invested at least $1bn of client money in companies linked to senior executives and its largest shareholders. Some of those transactions had been flagged by the compliance department for inadequate due diligence."}],[{"start":416.50000000000006,"text":"“If your boss, the CEO, who also happens to be a billionaire, tells you to do something, you just do it,” a former employee told the FT at the time. “Otherwise, you’re out.”"}],[{"start":427.25000000000006,"text":"The disclosures and subsequent scrutiny by the SEC intensified pressure on Walter, with investors and senior employees calling on him to give up his position leading the firm. "}],[{"start":436.95000000000005,"text":"When insurance meets sport"}],[{"start":439.30000000000007,"text":"It was a watershed moment when Walter, Boehly and their associates linked up with basketball star Magic Johnson to buy baseball’s Los Angeles Dodgers for more than $2bn, using money from insurers alongside their own cash."}],[{"start":454.45000000000005,"text":"Never before had an insurer ploughed such huge amounts of money into the ownership of a high-profile sports team — analysts and investors say they have struggled to untangle how the Guggenheim executives financed the takeover."}],[{"start":468.05000000000007,"text":"Walter would later package the Dodgers TV rights into a multibillion-dollar debt deal that was sold off to investors, including insurers managed by Guggenheim, a financing that recouped more than the baseball team’s purchase price, people involved in the deal tell the FT."}],[{"start":null,"text":""}],[{"start":484.45000000000005,"text":"Sports assets have often been exceptionally valuable investments and the Dodgers are the clearest example. But franchises, media rights and loans secured against sports assets are also illiquid, difficult to value and not the norm."}],[{"start":499.75000000000006,"text":"Walter later sold a valuable insurer to Johnson for an undisclosed price. Now that insurer, known as EquiTrust, has been acquired by another entity linked to Walter’s past and present business associates. Rating agencies have questioned whether the insurer Johnson once controlled will be used to manage billions of dollars of debt from the transaction."}],[{"start":521.9000000000001,"text":"It is “unclear” who now owns EquiTrust’s new parent, says Fitch Ratings analyst Zachary Shutts."}],[{"start":527.9000000000001,"text":"Last year a whistleblower also raised concerns about how Guggenheim had accounted for revenues from an affiliate that advised clients on private credit deals. "}],[{"start":537.2,"text":"The affiliate, known as Guggenheim Private Investments, recorded sales for 2024 even though the contracts that governed the deals were finalised in 2025. Guggenheim said that its 2024 and 2025 accounts had been fully signed off by its auditor."}],[{"start":554,"text":"The whistleblower report helped start the probe into Walter’s business empire, according to people familiar with the matter. "}],[{"start":560.85,"text":"What began as an investigation into the Guggenheim Private Investments unit has since spread to other corners of Walter’s businesses, including the two insurers that disclosed in June that they had made more than $20bn in loans tied to other parts of his sprawling investment empire. These had previously been misclassified as “unaffiliated”. "}],[{"start":null,"text":""}],[{"start":582.7,"text":"One of the two, Delaware Life, had said for years that it invested just 3 per cent of its portfolio in affiliated investments, just under the threshold required for regulatory sign-off."}],[{"start":594.35,"text":"But following the probe, it revealed that 42 per cent of the portfolio was being used to lend to other parts of Walter’s empire. It and fellow insurer Clear Spring, which Walter controls through TWG Global, have now set plans to reclassify billions of dollars of holdings. "}],[{"start":611.5,"text":"That misclassification could trigger capital shortfalls for the insurers and intervention by regulators."}],[{"start":618.6,"text":"After racing for weeks to find outside investors, TWG this week announced an agreement to stump up as much as $6.5bn in capital itself."}],[{"start":630.1,"text":"Meanwhile, Walter is not the figure in sport he once was. He initially sought to raise capital from Apollo for a loan against his stake in the Lakers. But this month he agreed to sell the team altogether at a $12.5bn valuation — barely a year after he had bought it. He is now in talks to sell his stake in Chelsea."}],[{"start":649.1,"text":"Beyond Guggenheim"}],[{"start":651.2,"text":"The crisis within Walter’s empire is not the first triggered by insurers who pursued trophy assets. Two years ago a Miami investment firm used policyholder funds to help pile hundreds of millions of dollars into an attempted takeover of Everton football club, only to later collapse."}],[{"start":668.9000000000001,"text":"Over the past decade, former Guggenheim executives such as Boehly, who left in 2015, have also become some of the industry’s most aggressive insurance asset managers."}],[{"start":680.1000000000001,"text":"Private and illiquid assets are not inherently risky for the insurance industry. Insurers have long-dated liabilities and need returns that will support them for decades to come. Private capital groups say they have helped to deliver more attractive retirement products for policyholders by pushing into asset classes beyond public bonds."}],[{"start":null,"text":""}],[{"start":701.8000000000002,"text":"“You cannot run an insurance company successfully and profitably if your only access is what exists in the public market,” Marc Rowan, Apollo’s chief executive, told an industry conference last year."}],[{"start":713.3500000000001,"text":"Apollo’s insurer Athene is one of the US’s biggest users of affiliated assets. Rowan has argued that such investments are well suited to his $1tn group. “We celebrate Apollo-originated assets because that means we are controlling the risk,” he said."}],[{"start":729.8500000000001,"text":"But others say the structure leads to conflicts when the same corporate ecosystem manages the insurer, originates the assets and benefits from the transactions."}],[{"start":739.9500000000002,"text":"The troubles at TWG will provide a test of the safeguards protecting America’s insurance system. "}],[{"start":746.3500000000001,"text":"Guggenheim’s problems may prove peculiar to one unusually complex empire, marked by years of infighting and alleged failures of disclosure. Or they may expose wider vulnerabilities."}],[{"start":757.2500000000001,"text":"Spokespeople for TWG, Walter, EquiTrust and Guggenheim Partners did not respond to requests for comment. Guggenheim’s asset management arm declined to comment. "}],[{"start":767.9500000000002,"text":"Boehly’s Eldridge says it fully complies “with the letter and spirit of insurance regulations”."}],[{"start":774.2000000000002,"text":"As private capital moves deeper into insurance, the big question is whether regulators are keeping pace with a fast-changing industry and whether policyholders can be confident that the assets backing their promises are worth what they are said to be."}],[{"start":789.3000000000002,"text":"“This is not the traditional private credit or alternative investment by wealthy people who can afford to lose that money,” says Jerry Schlichter, a lawyer who has led class-action lawsuits over retirement plans moving to private capital control. “These are average people who are depending on this for retirement for the rest of their lives.”"}],[{"start":808.6500000000002,"text":"Additional reporting by Jill Shah, Michelle Chan and Oliver Barnes"}],[{"start":820.7000000000002,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787392920_8490.mp3"}