Jake: Welcome back everyone to a new episode of Pathway to the Podium. In the previous episode, we reacted to Mark Walter's agreement to sell the Lakers, a team he only just bought a year ago, to a consortium led by Josh Kushner and Bob Iger. We talked about what was the driving force behind Walter's decision for what kind of appears to be an about face for a businessman who in the past has looked to buy sports properties rather than sell them. Of course, what looms quite large here is The federal investigation surrounding Mark Walter, and that's what this episode will be dedicated to. So very glad to have on today to talk about the legal implications of the Walter investigation is legal economist Andrew Granato. He is the assistant professor at the University of Texas School of Law. Hook 'em. He holds a JD
Andrew: Mm.
Jake: from Yale Law School, a PhD in financial economics from the Yale School of Management, and a BA in economics. from Stanford. He also previously served as a senior associate economist at the Federal Reserve Bank. of Chicago and if we go way back, but now a proud Middlesex alum like myself. Now
Andrew: Right. Go Zebras.
Jake: exactly right, yeah we got we need to get our own like hook'em type you know hand gesture.
Andrew: Yeah.
Jake: We have to work on that. We we'll do that afterwards. We'll figure that out after the recording. now Andrew has been over the relationship between private equity and life insurance has been all over this with his publications. He also has been quoted by the New York Times, the LA Times Financial Times, Front Office Sports. I think every single day he's in a new article, so it's great seeing his name out there and all these specific talk about Mark Walter's situation. So we're gonna do a deep dive on that here in this episode. I'm absolutely delighted to have you on the pod, Andrew.
Andrew: thanks for having me. I I'm I'm delighted to be here.
Jake: Awesome. So just as a quick recap here for in case for those of you who don't aren't as familiar with this or you missed the last episode, as a recap, Mark Walter bought the Lakers at a valuation of ten billion dollars in 2025. He's now selling them just a year later, less than even a year, at a valuation of $12.5 billion. So on the surface that sounds great. I mean like it sounds like a very quick profit for him. But again, like I say here, a lot of this has to do with this investigation going on at a federal Level. Also focusing on the Lakers right now, there's also some uncertainty whether or not this sale will actually close. There's some question here whether or not one of the co-owners, Jeanie Buss, will retain her share in the team and whether or not she has a legal right to do that. Her other siblings want out, she wants to remain in. So that's kind of a separate issue. It's kind of like a whole succession-like narrative going on with that. But we're focusing more on the Mark Walter situation here. So let's preface preface this conversation by noting at the time of this recording Mark Walter is not facing any charges at this time. What we do know is he's under investigation. And a lot of that investigation, of course, is happening behind closed doors. What we are relying upon here in this conversation has either been publicly disclosed or it's what news outlets and journalists have reported with their own analysis here. So you have these two investigations. Going on in tandem, one by the SEC, the Securities and Exchange Commission, and the other by the U.S. Attorney's Office in Manhattan. And at issue here is whether loans made, Walter made between his companies essentially constitutes fraud. So Walter is the CEO of Guggenheim Partners through his holding company, TWG Global. He has two Delaware entity life insurance companies, Delaware Life and Clear Spring. So Andrew, I'm gonna tee it off there for you now.
Andrew: Yeah, so Mark Walter is part of a new wave of investors in private equity who have decided to essentially combine the classic private equity structure of having a series of, you know, buyout funds that buy up companies, try to make them more profitable and resell them with life insurers. You know, or this might seem a you know a bit Surprising, I think when people think of life insurance, they don't typically think of this as being part of a you know kind of swashbuckling high finance, you know, sort of enterprise. But what life insurers have is a large amount of cash. They have a large amount of capital that they can deploy. Traditionally, what life insurers have done is they've taken in money from a ton of different policyholders and. And now, since they have that money up front, before they end up having to pay out things to beneficiaries, they you know pool all of that money and they invest it. Traditionally, they invested in pretty, you know, kind of stay, safe financial products like double and triple A bonds. And what private equity firms often have them do instead is invest in substantially riskier or opaque assets. Including what are called affiliated investments. And so that's when the insurer is investing in business entities that are under common control with that insurer itself. So if the private equity firm owns another business and then the insurer extends a loan to that other business, that would be an affiliated investment. What
Jake: So l let me let me just let me just stop there for one second, Andrew. So affiliate investments, just again for the audience so they can know, by itself, is that permittable or not? Is that okay?
Andrew: They're completely legal to do, but they're subject to a heightened level of disclosure. And the reason why is that when a controller is like standing on both sides of the transaction, you know, the same person controls the company that's receiving the loan and the company that is extending the loan, then you know, whoever's in charge has the opportunity to essentially decide, you know. Which of which of their children is the favorite child, and which is going to get preferential terms potentially. And for that reason, insurance regulation imposes a whole set of requirements on affiliated transactions that don't apply to like normal investments in third parties. And that structure and those additional requirements are where Mark Walter, you know, has allegedly gotten into a lot of trouble.
Jake: Okay. So based upon our understanding of this here It seems a of this has to do with the amount that was disclosed. So with Delaware Life, one of those two insurer companies here, the company initially reported at the end of 2025 that its total portfolio of investments made to companies that were affiliated with Walter was around three percent. Now, after some time there was some subpoenas and this internal investigation that happened, it turned out that the company revised that number from three percent all the way up to forty-two percent. So That's about seventeen billion right there with that company. And then with the other insurance seems like it might be around three billion. So this is about like a a twenty billion dollars here that wasn't previously reported. So what are the implications of that, Andrew?
Andrew: Yeah, so this is pretty shocking. It's pretty shocking for there to have been an understatement to regulators of this magnitude of the amount of affiliated assets that were on these insurers' balance sheets. And, you know, a lot of the reporting suggests that loans were made to entities that then made loans to other entities, and so there were chains of transactions. Some of which at least ended in entities affiliated with the Dodgers. So there are a variety of additional provisions that Mark Walter is or Mark Walter's insurers are are at risk of potentially violating. I'll focus on two in particular. The first or sorry, I'll focus on three. The first one and the most obvious one is that these are required to just be disclosed. They're required to be disclosed up front and available and visible on the insurer's balance sheet as an affiliated investment. And the insurers themselves have now admitted that they failed to do this. The second law that I think is relevant here is a kind of super disclosure requirement that applies to very large-scale affiliated transactions. I'll use the Delaware version of insurance law here because both Delaware Life and Clear Spring Life, which are the two insurers that that Mark Walter you know controls through TWG, are both incorporated in Delaware, but a lot of other states have analogous provisions. There's one provision that says if you make an affiliated transaction of over 3% of the insurer's total. balance sheet, then you have to report to the regulator that you are doing this transaction, and then the regulator has the opportunity to pretty much veto it. You have to give the regulator 30 days. And then if the regulator does not issue a disapproval, then the transaction can go through. So you know you'll you'll notice that the initial
Jake: Yeah.
Andrew: reporting of that was made to the regulators was that the total amount Of all affiliated assets, not just in one transaction, but in general, was about 3%, which was roughly at this level. And now we're, you know, so we're you know comically beyond that. So if at any point there was a single affiliated transaction or a a set of deals that you know cumulatively can be accurately described as one affiliated transaction that meet this threshold. Then that law was broken. And then the third provision I'll talk about is an anti-concentration law, where insurers are not allowed to invest more than 10% of their assets in the property of any one person. And so the idea there is that you want investments to be diversified. You don't want it to be the case that if a single counterparty goes down, the whole insurer would be. you know, irreplicably, you know, irreparably damaged. So 10% is the threshold that you're not allowed to go beyond. And so if the if these insurers invested more than 10% of their assets into the Dodgers and other entities that are Mark Walter's, you know, under Mark Walter's control, then you know they are have been in violation of that law as well. And so there's a whole series of provisions potentially that that are at issue. And that's before
Jake: Yeah.
Andrew: that's just the Delaware insurance law alone. Again, we don't know if there are potentially other issues that have come up in the federal investigations.
Jake: Yeah, that's really well said, Andrew. A and just to get for everyone's edification here, Mark Walter has a a lot of hands in the sports business. So even though he's in the process right now of selling the Lakers, he still holds the Los Angeles Dodgers, as he mentioned, the WNBA's Los Angeles Sparks, the Premier League team Chelsea, the League 1 team Strasbourg that's in France, the Cadillac Formula One team, Andretti Global, that's motorsport, and the entire PWHL that's women's professional hockey league. He has he he owns the entire league. So you know, we don't know the extent of this and exactly what where exact where exactly it begins and ends, but you could imagine here that the consequences of this could be potentially enormous and impact a lot of his other holdings.
Andrew: Yeah, so the Delaware insurance law provisions I discussed alone. You know, the the sanctions provisions related to those laws state that, you know, there's a variety of different things that could happen. One thing that could happen is that the regulators could force him to unwind those transactions. And another thing that could happen is he could be fined. And then perhaps most dramatically, if it's proven, you know, if a prosecutor like, you know, proves at trial that these violations were done willfully and with intent. to deceive the state of Delaware's insurance regulators, prison time is listed as one of the possible sanctions that that is punishable under these laws.
Jake: That's that's pretty substantial here. So in terms of potential, I guess, r I mean, remediation efforts, is it possible if Walter you know, let's just say for instance that this twenty billion has to actually get repaid somehow, okay? If he does that, does he go scot-free? Is that a possibility? Or are there gonna be further penalties involved with here? Or do we just not know?
Andrew: So it it it's it's difficult to say, but even let's take this hypothetical situation where Walter successfully raises, you know, all this money in cash, pays off all of these loans, and then the insurer no longer has any affiliated investments, then it would still have been the case that the insurers were out of compliance with
Jake: Mm-hmm.
Andrew: these various provisions, you know, during this time period. And so there y you know, depending on on I think what prosecutors and regulators want to do, you know, if it was the case that these provisions were violated at any point in the past couple of years, then barring any sort of statute of limitations issue, then that would still be prosecutable.
Jake: Okay. Are there any arguments here Walter and his companies can make that could, you know, absolve him of any liability?
Andrew: So I think for for for Walter specifically, you know for the criminal cases, you have to prove intent. And proving intent is always difficult. And you know, depending on how many layers of management there are in between the insurers and the ultimate controller, Walter, then that gets more difficult. So you My understanding from the reporting is that, you know, they're stating that these issues, you know, were accidents, that, you know, Walter was not aware that the insurers were out of compliance with the affiliated transaction disclosures, you know, that this has been one big mistake and that they're, you know, working to remediate all issues very quickly. So I I think that that would that would have to be like the the sort of argument that they would go with if charges were to be filed.
Jake: Okay. Alright. Is that the same case with the SEC?
Andrew: it's it's frankly not entirely clear to me what the
Jake: Okay.
Andrew: SEC's role is here. It depend
Jake: Yeah, I I'm not sure either. So that's that's what I wanted to ask you, yeah.
Andrew: so it's it's it's interesting. Most insurance products are not securities. And so you would think that a lot of this is not under the SEC's purview, and because the SEC has jurisdiction over securities fraud. However variable life and variable annuity products do have this unique regulatory position where they are simultaneously regulated as insurance products by the state level insurance regulators, and they're regulated as securities by the Securities and Exchange Commission. So, I mean, I I I I have no special knowledge about what the what the SEC is interested in here, but to to the extent that variable life and variable annuity products are at play, then and or also if there's interplay between you know the insurers and investment funds, investment funds are also regulated by the SEC. And so those are, you know, potentially things the SEC might be interested in.
Jake: So this intertwining here, this intermixing of private equity and insurers, if I am a policy holder, what should I be concerned about here in particular when it comes to this self dealing?
Andrew: So when you're an insurance policy holder, you even though you may not think of yourself as such, you are a creditor to this life insurance company. You show up on the balance sheet of this life insurance company as a liability or rather an actuarial liability because you have paid that insurer money. And in turn, that insurer has made you a contractual promise. If you're a life insurance policyholder, they've made a promise to pay out to your beneficiaries if you die while the contract is active. And if you're an annuity policy holder, you have been made a promise that you're going to receive payouts and other kind of hedging transaction services. So, in order for the insurer to make good on these promises that it has made to you, you know, that realize a very long time in the future, that insurer still has to exist. And so if the
Jake: Yeah.
Andrew: insurer has gone insolvent, so barring the insurance law, let's just imagine a world in which there was no law. If if the insurer just went down, well then you just lose all of your money that you have been paying in your for potentially quite a long time in terms of your premiums and you get nothing. And so what you have is a situation where it's very important That an insurer remains solvent for very long periods of time, which means it needs to be very conservative in the risk that it takes with its assets. If the insurer is doing things like concealing the true nature of its investments from regulators, if it is investing into high risk assets, if there is a risk potentially that The controller of the insurance company is using the insurer to get preferential access to loans and investments for their other businesses, you know, and making those decisions based on wanting to direct money to their other businesses rather than what's ultimately best for the policyholders, then that is putting you, the policy holder, at risk.
Jake: So in in essence then all of all the risk you say it goes then on the individual, which is a really unfortunate situation for them.
Andrew: Yes. And the way that the life insurance regulation in the United States tries to deal with this risk is this two-pronged approach. What they do is they provide a certain kind of backstop to policyholders in a somewhat similar way that banking depositors are backstopped by the Federal Deposit Insurance Fund. And then The other prong is that they impose financial regulations on the conduct of an insurer. So for example, the requirement that affiliated transactions have to be disclosed is like one such financial regulation where they are trying to do things that will reduce the amount of risk that the insurer is taking.
Jake: Okay. Based on your knowledge, Andrew, do you think that the current laws in place are adequate to protect the individual policy holder from this type of risky investment or do you think more is needed?
Andrew: In this case, they clearly failed. You know, the Delaware insurance regulator, you know, did not you know, permitted this to occur for quite some time. So that indicates to me that the way that the enforcement of the affiliated transaction disclosure laws is is you know certainly less than perfect. And I think a lot of this has to do with the fact that you know these life insurers they have very large balance sheets, and state level regulators have very limited resources and they're trying to, you know, prioritize you know certain things, and they just don't have the bandwidth to try to survey whether every single asset that every single life insurer reports to them was filed properly. You know, and so we have here this really extreme situation where half of an insurer's balance sheet was improperly classified. And it took a federal investigation, a federal criminal investigation, to get this insurer to notify the regulators about this issue and take corrective action themselves. So, you know, I I think it's it's a very difficult position that a lot of these regulators are in, but I think there's there's two main problems. One is the ability to enforce these laws is very limited, and two I think is the problem of the laws themselves not being strong enough.
Jake: X yeah, yeah, I fully agree with you on that. And it also seems like like the the problem either like you go down here for that it's also like two pronged in the sense that on one hand, like the real issue at stake here was that you know the disclosure never really happened in the beginning. And fortunately it was caught later. So in that instance like the system kinda worked, but like you need I I I think there needs to be more bite behind the disclosure requirements to begin with here to then make it easier for the regulators to review later. So like like like there were multiple steps here in which the process didn't fully work the way it should. Fortunately it it was caught eventually but like you said this never really should have happened in the first place, correct? If i i i if ever
Andrew: Yeah, but
Jake: if everyone was doing their job properly this this would have been stopped right at the beginning is what I'm saying.
Andrew: Yeah, I you know, and and who knows how long this would have gone on if not for the federal criminal investigation.
Jake: Yeah. Yeah. Th that's really well said. And again it just high this investigation by the way here is pretty serious on lots of levels here back in Where was this? yeah. In September 2025, the FBA ac the FBI executed a search warrant and seized Mark Walter's mobile phone and a laptop from a private plane at Chicago's Midway International Airport. So they literally stopped and got that material from him. Then additional warrants were also executed around the same time. What's really noticeable about this with the Mark Walter situation here and how it pertains to sports and his sports businesses is that this isn't the first time actually that Mark Walter has faced some legal issues with regard to what his related insurance companies are doing. So back in February 2014, there was this proposed class action lawsuit that was filed against Guggenheim Partners and against Walter and other of his affiliate companies. And among those allegations here were that essentially that he was obscuring affiliate investments, which Sounds pretty similar to what he's being investigated
Andrew: Yeah.
Jake: now. So like history has repeated itself here. I don't know how much you know about that particular lawsuit, Andrew Andrew, because based upon our understanding of it, that that lawsuit was essentially dropped the very next day by those who brought it. So presumably y you have to think they were probably incentivized to do so. Like we don't know what that is, but lots of times like like you know, plaintiffs don't just you know, drop a lawsuit the day after they they submit it unless there's something else that's going on there. But it this does seem to be kind of a like I said, a pattern here of behavior that is pretty concerning on Mark Walter's behalf.
Andrew: Yeah, you know, potentially there was some sort of like quick settlement to, you know, get these plaintiffs to drop the case. You know, it's interesting. Walter has put out a statement in in which he at one point claims, you know, no one has actually been harmed and also nobody has even claimed that they were harmed. but you know, people filed lawsuits over over this kind of behavior. So I think that would in my view, qualify as claiming that they have been harmed.
Jake: I I I fully agree. A and what again I find so interesting about this as well, about that 2014 lawsuit, is that of course preceded Walter's buying of the Dodgers and Walter's buying of the Lakers. And When it comes to all these sports leagues, the sports leagues offices have actually very little responsibilities. Lots of times the owners vote on things. The owners pretty much decide what happens with the league. But one thing that is very much within the purview of league offices is conducting the diligence to decide whether or not they can give the owners the okay that they can invite a new owner into the league, that that this that this team's sale could actually be approved. So when I look at this and I see that this 2014 lawsuit was filed, that's at least a yellow flag. And the fact that both the both Major League Baseball approved Walter being an owner and buying the Dodgers, and then the NBA approved Walter in being an owner and buying the Lakers, I have to think that moving forward here that these sports leagues as a whole are gonna have to completely change their diligence requirements, their diligence efforts moving forward, because it seems they likewise kinda dropped the ball. What I'm saying is essentially like they kind of act as their own regulators too, and similar to Delaware,
Andrew: Yeah.
Jake: they didn't do what they were supposed to do.
Andrew: Yeah, it and I think, you know, not not not that I know a whole lot about like
Jake: huh.
Andrew: what is going on in sports leagues, but my understanding is that a lot of these pro sports leagues have in recent years loosened their ownership requirements and large
Jake: Yes they have, yeah.
Andrew: investment firms have become at least part owners or the backers of a lot of different, you know, new owners over the the past decade or so. So If now sports teams are going to be owned, you know, less by you know individuals and more by these large consortiums, particularly you know consortiums where the the consortium itself is backed by this investment fund that is itself backed by you know limited partners, then we're multiplying the number of people that these sports leagues would could c you know have to look into quite substantially. And you know, with all of that comes the increased possibility for you know legal exposure or or histories that that might an invite you know further inquiry.
Jake: Exactly. Yeah. So it's gonna create a lot more work for these leagues moving forward. And I th I have to think, you know, just focusing back now on like the federal investigation, that this Mark Walter situation is gonna have to usher in at least somewhat of some sort of new regime, a regime change at least when when it comes to federal enforcement. I don't know exactly what that is and you might not know either, but I feel like this really is kind of like an instance in history where people are gonna say, boy Like we really we really dropped the ball on this and we can't have this happening moving forward.
Andrew: Yeah, I I think it de dep depends on on exactly, you know, how things turn out. whether ultimately criminal charges are filed. certainly it's the case that high profile sports team owners have been in in legal hot water before. but I think, you know, what makes this potentially a bit distinctive is the way in which The team owners' actions that are in dispute relate to their financial management of the team itself and are not is not just like behavior that occurs, you know, theoretically, like you know, off the field per se. Because the issue in in this situation is that a lot of these loans and investments that these insurers were making went to the Dodgers and entities affiliated with the Dodgers, like, you know, the kind of dealing with things like TV rights and stuff like that. And it's endlessly debatable, you know, to what extent these were sound investments or or not. But the the fact is that they, you know, were not you know disclosed properly and some some would say were concealed intentionally. So it it's it's it's difficult to say. But there's certainly a I think a lot of a lot of clouds.
Jake: I I appreciate your phrasing there too, 'cause I th there's a paper trail here and where exactly that paper trail ends is still unclear and how exactly intermixed it is with the Dodgers is unclear, but it it is noticeable that with all this self-dealing going on, the Dodgers could potentially be in a a house of cards. They may or may not, but they could be. And as you also rightfully noted here, the the Dodgers are potent are the most important of the franchises because, as as MLB fans could know quite well, there is no salary cap in Major League Baseball compared to where there is in the NBA, for instance. So when there's no salary cap in This is a big issue right now going on with Major League Baseball in the Players Union and the most likely what's going be an impending lockout coming next year, is without a salary cap in place, these teams like the Dodgers that keep spending, spending, spending, and accumulating more and more and more talent, which of course the Dodgers have done they've they've been extremely successful at that, as you know World Series champions here, compared to other teams whose payroll is much, much smaller. But that being said, regardless of whether you like not having a salary cap or not, if i i if they're skirting the rules essentially and self funding this and there's actually no real money behind it, that is extraordinarily problematic.
Andrew: What's interesting to me is one of the things that's interesting to me is that you know the previous time my attention had been drawn to you know the financial engineering surrounding the Dodgers was the Shohei Ohtani contract, which
Jake: Mm-hmm.
Andrew: displayed a lot of you know kind of creativity in using a really, really backloaded deferred comp structure. To try to leverage the discounting and present value rules in the kind of ML MLB's like kind of pay pay structuring and and and penalties on overall team spending. And so it it it seems to be the case that you know maybe part part of the kind of culture of this organization on the management side is to like pursue these pretty aggressive. you know financial engineering's and both and you know and we we saw that first or or at least publicly at first with the Ohtani contract. but it seems like the back end of a lot of the organization itself is also employing these like aggress aggressive you know kinds of financial structurings.
Jake: Exactly. Yeah. A and and to be clear, the Dodgers are not the only ones who do that, but the Dodgers appear to be the ones that do it most forcefully, let let's say. And it's not just with the Ohtani contract, but with other contracts they have as well. So yeah, I I think again that you really spotlight how like like if the right dominoes fall here This this investigation with Walter could have a lot of unintended consequences and could potentially and I don't I don't want to get too far ahead of ourselves here, but I mean this could potentially force a selling off of sorts of other sports assets that Walter has. And if that were the case, I mean, like you would look at it in absolute feeding frenzy here for others bidding on these sports. So like on one hand, it w it could be a fire sale of sorts, but it might be one that he actually profits off of, despite the fact but i it is extraordinarily problematic here because these leagues also have particular rules as well, in terms of like you said, you know, the amount of ownership and like how much actual money do these owners have, 'cause that's obviously very, very important. but if this whole thing it truly is just a a castle made out of sand and it's getting blown away by the wind and getting battered by the waves here, Walter is in a ton of problems.
Andrew: Yeah, I think that something that is is proving to be very helpful to Walter here s pretty bright. I'll is the fact that he is so exposed to pro sports as an asset class at the a perfect time, you know, a
Jake: Mm.
Andrew: time when valuations of these assets are skyrocketing. You know, he's managed to, you know, book a $2.5 billion gain on the Lakers in less than a year. he did he didn't own 100% of the Lakers, but the overall valuation you know went up by 2.5 billion. And So, in in a sense, that might ultimately be what helps to stabilize the insurers. Ordinarily, in a situation like this, there is a there would be a big problem because if there's suspicion cast on the assets of an insurer, and the insurer needs to unload those assets very quickly, then there's an issue where you know these assets are. considered suspicious and so potential buyers don't really want to buy them
Jake: Mm-hmm.
Andrew: or they wouldn't perhaps insist on substantial discounts to buy them. And of course, you that comes at the worst possible time for an insurer who is like trying to raise cash and trying to get assets off of their balance sheets. And that's what leads to a a situation that that you know would call some people would call a fire sale. And what reporting seems to indicate is that Mark Walter is not trying to sell a lot of these, you know, affiliated assets to third parties, but Walter is instead, you know, doing a two-pronged approach. One is that TWG is performing, according to reporting, I believe it's a six point five billion dollar asset swap with Delaware Life. And two is that Walter Is raising a tremendous amount of money very, very quickly by selling his sports assets and gaining liquidity that he can use to pay back the loans directly. So the selling of the Lakers is the big marquee sale so far. There's also reporting that he is in talks to sell his interest in Chelsea. After that, You know, like a lot of these other assets, like I I don't know how much like the you know, his interest in in these F1 teams, for example, are going to bring in. I assume not as much as selling the Lakers. The the big remaining marquee pro sports asset that he has access to is the Dodgers. And he and the team have been very insistent that they are not selling and that, you know, basically i the attitude is like over my debt. And you know, whether he will or or will not ultimately have to sell the Dodgers, like I have no idea. they they certainly are are stating that that's not going to happen. But you know, one way that Mark Walter has found to try to get these affiliated assets off of these insurers' books is to just raise a tremendous amount of money from This marquee asset class, and then make these direct repayments to repay the loans.
Jake: When it comes to these repayments, Andrew, is there a certain timeline he has to do that by?
Andrew: I'm not sure. I think likely it's the case that he and the Delaware regulators and potentially, you know, the DOJ and SEC are are coordinating on this sort
Jake: Uh-huh.
Andrew: of thing. Certainly the speed of the Lakers transaction indicates
Jake: Which was very sudden. Yeah, yeah.
Andrew: yes, cer certainly that indicates that, you know, they're they're hustling to to to get these sorts of things moving. But but I I don't believe it's been reported if there are any sp specific timelines, though I'm not sure.
Jake: Yeah, I I'm not sure either, but I think you hit on the head that that what we have to understand is that Walter is defin Walter's camp is definitely in conversations with the federal government's camp and any other investigators' camp on this, that that that there probably is some sort of understanding being worked out, at least in regards to some of this. Now, you know, may maybe with that comes, you know, sub agreement that maybe federal charges won't be pursued, maybe, maybe not. But you have to realize here that th that there are definitely conversations happening behind closed doors that we're not being privy to that. could very much impact the final result here for Walter and whether or not he is gonna f see the need to potentially offload any of his other sports assets.
Andrew: Yeah, I believe in the statement that TWG put out, they said that they have a plan with the Delaware insurance regulator to get rid of all of the affiliated asset exposure of the insurers. And so, you know, that takes a tremendous amount of work. They I they didn't specify how exactly that is going to be done, but you know, potentially that can involve, you know, sales of these assets to third parties. But it certainly seems so far that the main thing that is happening is related party transactions that reverse the previous undisclosed related party transactions.
Jake: Mm. Whi which could you know in and of itself create more problems potentially.
Andrew: Well well in this well in this case they're you know, they're in they're doing full reverse to in consultation with the with the regulators.
Jake: Well,
Andrew: but yeah, there's a there's an irony to the to this definitely.
Jake: Yeah. That's that's what they're try they're trying to
Andrew: Yes.
Jake: do. An Andrew, th thank you so much. This has been extremely informative. Is there any other aspect of this investigation that we haven't covered that you'd like to talk about?
Andrew: I think the last thing that I would say is that the ultimate backstop for a lot of life insurance policies is actually taxpayers. And if a life insurance company goes insolvent, you know, potentially because the insurer does a poor job managing the assets and then they lose a ton of money and then no longer have the money to pay policyholders, a lot of state law. Works through these mechanisms called insurance guarantee funds, which ultimately cause taxpayers writ large to be on the hook to bail out the policyholders of an insurer that fails. These mechanisms exist to protect policyholders, but they also have potentially adverse consequences because they You know, they they mean that like insurance policyholders who already are not in a good position to try to monitor what an insurer is is doing with their money also just have very little incentive to monitor what an insurer is doing with their money. And so you end up with this trade-off where policyholders get protected, but also, you know, the life insurance company knows that this apparatus exists. And they know that they get to keep the upside of risky investments that they make, but that the downside of risky investments that don't pen out will ultimately get socialized out to other people.
Jake: Mm-hmm.
Andrew: So, you know, in extreme cases, if an insurer were to actually go and solve it because of you know, you know, investments that don't work out or something else, it you know, a lot of People will ultimately have to pay for it, not just the direct counterparties involved.
Jake: And that's the part that really sucks. 'Cause those who are essentially innocent in all this, could be the ones that are actually hit the hardest.
Andrew: Yeah, I I think, you know, the insurance regulation takes the position that okay, you get to have all of these backstops, but in return, we're going to try to limit the risks that you take, because in a sense you're gonna you're playing a bit with house money. And so y you know, i an irresponsible insurer has incentive to do things like invest in in really risky things and you know, not tell anybody about what they're doing and maybe try to use the insurer to benefit other businesses that the controllers have. And I think it's obviously it's a shame the situation that's happening, but in in a sense I'm glad that it's drawing attention to these issues because they're very important and and a lot of the moves that a lot of private equity firms have been making In the life insurance industry, you know, they're not accused of the same failure to disclose affiliate transactions that Mark Walter is. but they are using, I think, a analogous business model where they are merging in a life insurer to make increasingly risky investments.
Jake: How how prevalent is that practice, Andrew, across the board?
Andrew: Life insurance companies, you know, it's estimated that about a trillion dollars worth of life insurance assets is under the control of private equity right now.
Jake: Wow. That's definitely something you should consider, I guess, for anyone seeking insurance at the moment. A and like you said as well, it it's like unfortunately, in order to shine light upon something, lots of times something bad has to happen first. So I guess I mean, hopefully a positive will come out of this again that there has to be, I think, some sort of you know, regulation change here. I g I don't know what exactly what that might be and it's probably gonna take some time to do so, but I think this really is a moment where a lot of people within the government need to wake up and realize that this could have a lot of consequences down the road for the uh taxpayer and for the citizen.
Andrew: I agree.
Jake: Yeah. Yeah. so Andrew, just l let's talk a little bit about you here for a second, man. what are you teaching right now at U T?
Andrew: I'm teaching a seminar on specialty kinds of business associations. Actually I have two units in this class. One is on private equity funds and another is on insurers. So in a few weeks I'll get to speak with students about like the underlying business model of of PE funds and also the underlying business model of insurers, and that's something I'm really looking forward to.
Jake: That's particularly timely. And I think I also saw that you are part of an insurance law workshop at UConn, is that correct?
Andrew: Yeah, so I'll be pr so I wrote a paper with Pranjal Drall called Private Credit's State Backstop, and the which is about this new business model that private equity has developed. And so I'm presenting that paper at a series of of conferences, and one workshop that I'll be presenting the paper at is at a UConn insurance workshop that is open to the public. And so if people are interested, they can Google around for the insurance law workshop and sign up to to you know watch it on Zoom.
Jake: That's awesome. Yeah, so yeah, I highly recommend it like if you enjoyed this conversation with Andrew, please, please do that. lastly, Andrew, where can people follow you on a social media if they want to get more of your insights?
Andrew: I'm on Twitter at agranato42 where you know I I talk about life insurance, private equity, movies,
Jake: Mm-hmm.
Andrew: thing you know, things of such nature.
Jake: I I think there might be I mean, i if this investigation goes any deeper there might be Mark Walter film, you know i in in the near future.
Andrew: Yeah. I I I look forward to my inevitable future of being the professor talking head in a documentary twenty years from now where I say like we all knew how what was going to happen. and yet
Jake: Yeah. Well well I I very much on one hand look forward to that moment and also do not look forward to that moment because that means that it was really, really bad. But Andrew, thank you so much for coming on. I I I hope this was able to really highlight a little a a little more for our viewers and for the audience here to understand the nuances of this investigation and also that this could have, like I said again, lots of potential effects here down the road. And again, we don't know what the timeline is of this yet, but this is something that I assure you that both the federal government And sports leagues, the head of sports leagues are paying a very particular attention to. So thank you, Andrew.
Andrew: Yeah, thanks for having me on.
Jake: Have a good one.
Andrew: You as well.
Jake: It's now time for Jake's Takes. Last week there was the sad news of the passing of Bill Rasmussen, the co-founder of ESPN. He was ninety-three. It goes without saying Rasmussen was instrumental in shaping how sports is consumed on television and other media outlets today. Back in the 1970s, he envisioned a cable network that would cover Connecticut-based sports. This was when cable television was still very much in its infancy. It wasn't clear whether the cable model was financially sustainable, nor whether Americans would be willing to adopt it. Plans shifted from a regional station to a station being broadcast across the entire US and covering sports on a national level. So, ironically, even though it was called cable TV, it was highly reliant upon satellite communication. ESPN made the very wise decision in hindsight to quite early strike up an agreement with the NCAA, and those ties, of course, have strengthened ever since. ESPN greatly relied upon outside investors, and those investors in turn essentially sidelined Rasmussen and quite shortly thereafter forced him out. Over the decades since, ESPN offered an olive branch to Rasmussen, and they appeared to be on better terms with each other, with Rasmussen frequenting the British the Brit the Bristol campus. But remember, none of this here happens without Rasmussen. The network's relationships with all the major US sports leagues all sprung out of this flipping of the switch. Likewise, the iconic SportsCenter studio program made the careers of countless individuals. It is sad, ironic, and in some ways oddly fitting that both Ted Turner and Bill Rasmussen passed away this year, just months apart from each other. Both were visionaries. CNN began broadcasting June 1, 1980. ESPN first hit the airwaves a year earlier on September seventh, 1979. Both channels were mainstays, the destination for their intended audiences. If you wanted breaking news, you tuned to CNN. If you needed a sports fix, ESPN was your number one choice. It is frankly incredible how prominent both of these networks became and how quick that rise was particularly since it was far from guaranteed that they would succeed. Rasmussen passed away the same year his company, ESPN, began its year long promotion of the first ever Super Bowl broadcast that it would have, something certainly even he would not have envisioned when this venture first took off. The selling of sports franchises continues. Last week news broke that the NFL's Atlanta Falcons had reached an agreement to sell a ten percent stake to private equity firm Arctos pending league approval. With it comes a valuation of around ten point six billion dollars. The very next day it was announced a change in controlling ownership was taking place with the NBA's Minnesota Timberwolves and the WNBA's Lynx, with the combined value of those two teams being around $4.5 billion. Mark Lore has agreed to sell his controlling interest to Mark Stad. Stad was already a limited partner, having joined as part of the Lore-ARod ownership group. Mark Lore and Alex Rodriguez originally agreed to purchase the Timberwolves and Lynx back in 2021. However, a dispute arose between them and then owner Glen Taylor. Arbitrators eventually ruled in favor of Lore and Arod. In 2025, at which point those two assumed ownership. Now in 2026, Lore steps out of that role. Some takeaways from these news items. Private equity's role in sports business continues to grow, and that shouldn't be surprising. As valuations of sports franchises continue to rise, there are few individuals wealthy enough to afford a controlling stake. Financial institutions are quickly becoming the preferred and perhaps soon only realistic option. The mom and pop days of team ownership are definitely in the past. The major sports leagues in the US have rules, of course, limiting how high a stake a team can have with private equity, how much private equity can hold within that team. But one has to assume that this limit will be increased in the near future because it essentially has to. The Falcons being valued around 10.6 billion also underscores that, relatively speaking, the Seattle Seahawks, despite being the reigning Super Bowl champions, are not as desirable as a franchise. The Seahawks sale valued the team at 9.6 billion, that's 1 billion less than the Falcons now. Atlanta is a larger TV market, it's on the East Coast, and has a stronger media presence because of its history. The Falcons, of course, have not performed nearly as well on the field as the Seahawks have in recent years. So on-field performance clearly isn't a determinative factor as to price. It can't hurt to have titles, but it doesn't help as much as one might think. Worth highlighting: We now have two instances in the NBA of controlling ownership very quickly changing hands after the team was just sold in the Lakers and the Timberwolves. Now the circumstances may vary, but it doesn't change the fact that these franchises are essentially being flipped like houses. Yes, every time these teams exchange hands the valuation goes up. And that's understandable. But it's not a good thing to have this amount of instability with leadership. Businesses, of course, prefer some consistency. In the NBA there have been eleven change of control sales since twenty twenty and twenty five of those since twenty ten. Four teams were sold twice during that span. The Lakers and Timberwolves, of course, but also the Bucks and Hornets. Buying sports teams, particularly in the NBA, is less of a passion project and more of a business investment. The question becomes, does this trend ramp up even further? In the NBA? Or does this pattern bleed over into other American sports? Bear in mind with the NFL, some of those recent sales were triggered by the passing of the owner. It was mandated as part of the estate. But the getting in and getting out, quickly mentality, if that were to hit the NFL, would create a whole new level of business drama. The San Francisco 49ers tumultuous offseason has gotten even worse. Team owner Jed York was arrested in Ohio for trying to pay for sex. This was part of a sting operation conducted by a human trafficking task force. York responded to a prostitution website and arranged a meeting with what he thought was with a sex worker. He intended to pay between $140 and $160 for the encounter. He was arrested at a trailer park in rural in the rural town of East Palestine. He was charged with one count of engaging in prostitution and one count of possessing criminal tools, that tool being the cellular device he used to arrange the illegal act. He pleaded down, reached a plea deal where he pled no contest to a charge of disorderly conduct and no contest to possessing criminal tools. So that's a five thousand dollar bail, another one thousand one hundred and fifty dollars in fines, and he had to serve one day in jail. So financially speaking, this was no skin off of Jed York's nose, but reputationally it is a very different story. Once again the spotlight is very much on the San Francisco 49ers organization for all the wrong reasons. Jed York's arrest comes a little over a month after head coach Kyle Shanahan's infamous car crash, where the team and Shanahan appeared to cover up several facts about the incident and only had to do in an about-face when several journalists dug up more info. Shanahan, it seems, has continuously changed his account of what happened, which hasn't helped matters. And now we have this even more public episode making national headlines. In addition to being the owner of one of the most famous NFL franchises, York serves on several of the league owners-led committees, according to the team's website, including the Stadium Committee, the NFL's owned and operated media businesses, business ventures, as well as fan engagement in major events. He, like everyone else involved in the NFL, is subject to the league's personal conduct policy. The NFL says they are reviewing the matter. That being said, if you look at prior incidents as involving team owners such as Patriots owner Robert Kraft and the late Colts owner Jim Irsay, there appears to be a bit of a double standard. Owners tend to not get penalized as severely as players would be for the same or similar actions. Whether York is punished in any shape or form is yet to be determined. Suffice to say, the 49ers' reputation, which already has taken quite a hit this summer, has somehow even eroded further. And here is the really astonishing part of this. As I said a couple episodes ago, see episode thirteen for more on the Shanahan incident, the 49ers are one of the highest valued sports franchises in the world. Jed York is a billionaire with almost unlimited means, something one of the arresting officers likewise noted, which you can hear if you want in the recently released body cam footage. York could easily hop on a p a private jet on his own plane and fly to any country where prostitution is legal and there are plenty of countries where that is the case. Or he could just cross state lines and go to a Nevada county where prostitution is allowed. Instead, he's shelling out $140 or so, responding to some crappy online advertisement like a bum. Now, he was born and raised in nearby Youngstown, Ohio, so that's the Ohio connection. But still, in addition to the illegal aspect of this, it is all extremely embarrassing. It also speaks to how people in positions of power, perhaps because they think they're untouchable, do incredibly stupid things. And York is going to have to answer for that. It has also come to light York filed for divorce from his wife back in May. That divorce has yet to be resolved. He cited irreconcilable differences and is seeking joint legal and physical custody of their two sons. So that also gets the public spotlight, which is unfortunate for the family. Super Bowl 60 feels like a very, very long time ago. Between the 49ers and the Mike Vrabel news, this has been an offseason sports fans won't forget for a long time. Real games cannot start soon enough for the league, because there's no denying this has been a very rough look for them. In September, the 49ers will celebrate the eightieth anniversary of their inaugural game their organization played. One could argue that this year, the year 2026, has been the worst year in team history, and the season hasn't even started yet. Shifting to Formula One, the speculation has subsided, at least for now. Red Bull driver Max Verstappen has signed an extension through the 2030 Formula One season. The four-time F1 champion certainly played hardball during these negotiations, but of course, given his extensive resume, he had every right to do that. While Verstappen's prior contract ran through the year 2028, there were performance-based exit clauses he could have exercised that would have allowed him to get out of the contract and join another Formula One team, such as Mercedes and McLaren, or compete in some other modus sport. Max also, of course, could have decided to retire. Now that might sound a bit extreme for such a prominent driver so very much in his youth, but Verstappen was extremely vocal in how frustrated he was with Formula One's current hybrid engine regime. Repeatedly in interviews he said how it no longer felt like racing and likened it to Mario Kart. Max was not alone in voicing opposition to this regime, but he was by far the loudest. Subsequently, Formula One made some tweaks to this year. and slightly altered their plans when it came to the internal combustion engine slash battery battery ratio for future years, but all these changes were pretty minor and far from what Verstappen had publicly called for. This then led to the question whether Max would indeed walk away. Loyal listeners to this pod will recall an earlier episode where Formula One commentator Nelson Valkenburg and I discuss at length the implications of Verstappen possibly changing Formula One teams or leaving F1 entirely. See episode 6 for that. And Nelson and I agreed if Max were to bid adieu to Formula One, it would be an enormous blow to the sport. Not a knockout punch, mind you, but it would certainly make Formula One quite woozy. Some reports have pegged Max's new contract at what 110 US 110 million US dollars a year when factoring in bonuses, which has almost double the 60 million a year he was making previously. The major question here becomes whether this new contract once again contains those exit clauses. Now, these exit clauses are pretty commonplace in F1 deals, particularly with drivers of Max's caliber. But you have to wonder whether Red Bull greatly increasing Max's Salary meant the team was able to issue those pesky driver-friendly exit clauses. Maybe, maybe not. What the exact language is in this particular case has not been reported. So there's no absolute guarantee Max is still driving for Red Bull come 2030. But this new contract should quell the barrage of rumors that have surrounded Max for the last couple of years. We also don't know what conversations Max may have had with Formula One leadership itself and the FIA about engine rules in future years. Maybe some sort of understanding was reached to entice Verstappen to stay. Maybe not. In the short term, Max staying at Red Bull means that we're not going to have a chaotic domino effect or game of musical chairs, which would have happened if he had changed teams or exited the sport. Most of the major drivers on the grid are either locked into contracts of their own or are extremely unlikely to depart their current teams. It seems for now at least the contractual drama that has taken place off the track in the past couple of years has mostly calmed down. While Verstappen's new contract was met with much fanfare, Max's first race after getting the extension did not go well. He crashed at the end of just the opening lap of the Dutch Grand Prix. Fortunately he was not harmed, but the incident does underscore yet again that this season has not been the smoothest of sailing for Red Bull. But now at least their future is a little more clear. This Jake's Takes began on a sad note, and will also end on one with the passing of Dolly Parton. The Queen of Country leaves us at the age of eighty. Dolly Parton had been involved in music her entire life. She started writing songs at the age of seven. Over the years she composed so many hits, including I Will Always Love You, which was a critical and commercial success by itself, and then Whitney Houston blasted it off into the stratosphere with her recording. Also, Jolene, Coat of Many Colors, and Nine to Five continue to this day to be iconic. She is one of the best selling music artists ever with over fifty studio albums. She also won eleven Grammy Awards and also received numerous accolades for her acting abilities as well. You simply cannot tell the story of entertainment or even the broader Americana without dedicating a chapter to her in her distinguished career in life. President Trump ordered that US flags be lowered for one week in her honor. The Empire State Building Tower Lights turned to a Pink sparkle at the night of a passing at 9:25. Parton was inducted into the Country Music Hall of Fame in 1999, the Songwriters Hall of Fame in 2001, and the Rock and Roll Hall of Fame in 2022. Dolly Parton was also an extremely active philanthropist. Her work was headlined by the Dollywood Foundation. Her Imagination Library has gifted more than 300 million age appropriate books to children across the world. There are numerous scholarships in her name to help young adults get an education. She donated $1 million to coronavirus research and millions and millions more to children's hospitals and disaster relief. In particular, assisting community. is impacted by the East Tennessee wildfires, Middle Tennessee flooding, and Hurricane Helene. She received the Carnegie Medal of Philanthropy in 2022. Tributes have poured in across the world for Dolly, but one that particularly stood out to me was Taylor Swift's statement. Taylor and Dolly had immense respect for each other, so this one felt particularly poignant. And here is part of it, and I quote. She was truly the gift that kept on giving. Dolly gave us someone to look up to while encouraging us to be who we are as individuals. Somehow she was able to give us her lessons about the world gently and honestly, simultaneously, and oftentimes hilariously. She managed to give the world the ultimate mystery and fantasy in some corners of her life, but to give full transparency in the ways that counted. Somehow she was true grace and true grit all in one dazzling person. She possessed the softest heart when it came to the struggles of others, and a backbone of steel to defend her own self worth as an artist. Along with her other fans, I am so grateful for all of it. For the melodies and lyrics she wrote that thawed even the coldest hearts, for the millions of books she provided children all over the world so that they might fall in love with the stories the way she did. For the tightrope she walked so that young girls like me could grow up dreaming of joining the circus too. Dolly, I'll think of you each step of the way. End quote. That was beautifully said by Swift and I cannot top it. But permit me to say this about Dolly. She was such a bright star and a friend and an inspiration to so many. And her star would now shine all the brighter. She was a phenomenal talent, and that talent was only eclipsed by her kindness and generosity. Dolly Parton dead at the age of eighty. We will always love you. And that concludes this episode of Pathway to the Podium. As a reminder, please check in on prior episodes if you've missed any of those. For the previous episode we had on Big Sky Commissioner Tom Wistrcill. And in the Jake's Takes portion of that episode is my initial reaction to the Lakers sale news if you want to hear that. Other recent episodes include my coverage of the ESPN layoffs and Kyle Shanahan's car crash. Sportico's Eben Novy-Williams on the Seattle Seahawks sale, which by the was just approved by the NFL a few days ago. And the economic sustainability of professional cycling. You also have on the Wall Street Journal's Joe Flint on NBCUniversal getting spun off from Comcast and where things stand on the planned Paramount WBD merger. And then as well, we have The Sports Video Group's Brandon Costa going behind the scenes of a FIFA World Cup broadcast and providing information on how drone technology and scorebugs work in Broadcasting. So please subscribe, follow, and like this podcast on social media if you haven't already. You really should. I would appreciate it. video episodes of this pod are available on both Twitter slash X and YouTube. On Twitter, that's at JakeAKline, that is J-A-K-E-A-K-L-I-N-E, and at PathwayToThePod. On YouTube, that is at PathwayToThePodiumPod. You can also follow on Instagram and TikTok at pathwaytothepodium. Jake Kline wishing you and yours a good week. Bye everyone.
Andrew: Mm.
Jake: from Yale Law School, a PhD in financial economics from the Yale School of Management, and a BA in economics. from Stanford. He also previously served as a senior associate economist at the Federal Reserve Bank. of Chicago and if we go way back, but now a proud Middlesex alum like myself. Now
Andrew: Right. Go Zebras.
Jake: exactly right, yeah we got we need to get our own like hook'em type you know hand gesture.
Andrew: Yeah.
Jake: We have to work on that. We we'll do that afterwards. We'll figure that out after the recording. now Andrew has been over the relationship between private equity and life insurance has been all over this with his publications. He also has been quoted by the New York Times, the LA Times Financial Times, Front Office Sports. I think every single day he's in a new article, so it's great seeing his name out there and all these specific talk about Mark Walter's situation. So we're gonna do a deep dive on that here in this episode. I'm absolutely delighted to have you on the pod, Andrew.
Andrew: thanks for having me. I I'm I'm delighted to be here.
Jake: Awesome. So just as a quick recap here for in case for those of you who don't aren't as familiar with this or you missed the last episode, as a recap, Mark Walter bought the Lakers at a valuation of ten billion dollars in 2025. He's now selling them just a year later, less than even a year, at a valuation of $12.5 billion. So on the surface that sounds great. I mean like it sounds like a very quick profit for him. But again, like I say here, a lot of this has to do with this investigation going on at a federal Level. Also focusing on the Lakers right now, there's also some uncertainty whether or not this sale will actually close. There's some question here whether or not one of the co-owners, Jeanie Buss, will retain her share in the team and whether or not she has a legal right to do that. Her other siblings want out, she wants to remain in. So that's kind of a separate issue. It's kind of like a whole succession-like narrative going on with that. But we're focusing more on the Mark Walter situation here. So let's preface preface this conversation by noting at the time of this recording Mark Walter is not facing any charges at this time. What we do know is he's under investigation. And a lot of that investigation, of course, is happening behind closed doors. What we are relying upon here in this conversation has either been publicly disclosed or it's what news outlets and journalists have reported with their own analysis here. So you have these two investigations. Going on in tandem, one by the SEC, the Securities and Exchange Commission, and the other by the U.S. Attorney's Office in Manhattan. And at issue here is whether loans made, Walter made between his companies essentially constitutes fraud. So Walter is the CEO of Guggenheim Partners through his holding company, TWG Global. He has two Delaware entity life insurance companies, Delaware Life and Clear Spring. So Andrew, I'm gonna tee it off there for you now.
Andrew: Yeah, so Mark Walter is part of a new wave of investors in private equity who have decided to essentially combine the classic private equity structure of having a series of, you know, buyout funds that buy up companies, try to make them more profitable and resell them with life insurers. You know, or this might seem a you know a bit Surprising, I think when people think of life insurance, they don't typically think of this as being part of a you know kind of swashbuckling high finance, you know, sort of enterprise. But what life insurers have is a large amount of cash. They have a large amount of capital that they can deploy. Traditionally, what life insurers have done is they've taken in money from a ton of different policyholders and. And now, since they have that money up front, before they end up having to pay out things to beneficiaries, they you know pool all of that money and they invest it. Traditionally, they invested in pretty, you know, kind of stay, safe financial products like double and triple A bonds. And what private equity firms often have them do instead is invest in substantially riskier or opaque assets. Including what are called affiliated investments. And so that's when the insurer is investing in business entities that are under common control with that insurer itself. So if the private equity firm owns another business and then the insurer extends a loan to that other business, that would be an affiliated investment. What
Jake: So l let me let me just let me just stop there for one second, Andrew. So affiliate investments, just again for the audience so they can know, by itself, is that permittable or not? Is that okay?
Andrew: They're completely legal to do, but they're subject to a heightened level of disclosure. And the reason why is that when a controller is like standing on both sides of the transaction, you know, the same person controls the company that's receiving the loan and the company that is extending the loan, then you know, whoever's in charge has the opportunity to essentially decide, you know. Which of which of their children is the favorite child, and which is going to get preferential terms potentially. And for that reason, insurance regulation imposes a whole set of requirements on affiliated transactions that don't apply to like normal investments in third parties. And that structure and those additional requirements are where Mark Walter, you know, has allegedly gotten into a lot of trouble.
Jake: Okay. So based upon our understanding of this here It seems a of this has to do with the amount that was disclosed. So with Delaware Life, one of those two insurer companies here, the company initially reported at the end of 2025 that its total portfolio of investments made to companies that were affiliated with Walter was around three percent. Now, after some time there was some subpoenas and this internal investigation that happened, it turned out that the company revised that number from three percent all the way up to forty-two percent. So That's about seventeen billion right there with that company. And then with the other insurance seems like it might be around three billion. So this is about like a a twenty billion dollars here that wasn't previously reported. So what are the implications of that, Andrew?
Andrew: Yeah, so this is pretty shocking. It's pretty shocking for there to have been an understatement to regulators of this magnitude of the amount of affiliated assets that were on these insurers' balance sheets. And, you know, a lot of the reporting suggests that loans were made to entities that then made loans to other entities, and so there were chains of transactions. Some of which at least ended in entities affiliated with the Dodgers. So there are a variety of additional provisions that Mark Walter is or Mark Walter's insurers are are at risk of potentially violating. I'll focus on two in particular. The first or sorry, I'll focus on three. The first one and the most obvious one is that these are required to just be disclosed. They're required to be disclosed up front and available and visible on the insurer's balance sheet as an affiliated investment. And the insurers themselves have now admitted that they failed to do this. The second law that I think is relevant here is a kind of super disclosure requirement that applies to very large-scale affiliated transactions. I'll use the Delaware version of insurance law here because both Delaware Life and Clear Spring Life, which are the two insurers that that Mark Walter you know controls through TWG, are both incorporated in Delaware, but a lot of other states have analogous provisions. There's one provision that says if you make an affiliated transaction of over 3% of the insurer's total. balance sheet, then you have to report to the regulator that you are doing this transaction, and then the regulator has the opportunity to pretty much veto it. You have to give the regulator 30 days. And then if the regulator does not issue a disapproval, then the transaction can go through. So you know you'll you'll notice that the initial
Jake: Yeah.
Andrew: reporting of that was made to the regulators was that the total amount Of all affiliated assets, not just in one transaction, but in general, was about 3%, which was roughly at this level. And now we're, you know, so we're you know comically beyond that. So if at any point there was a single affiliated transaction or a a set of deals that you know cumulatively can be accurately described as one affiliated transaction that meet this threshold. Then that law was broken. And then the third provision I'll talk about is an anti-concentration law, where insurers are not allowed to invest more than 10% of their assets in the property of any one person. And so the idea there is that you want investments to be diversified. You don't want it to be the case that if a single counterparty goes down, the whole insurer would be. you know, irreplicably, you know, irreparably damaged. So 10% is the threshold that you're not allowed to go beyond. And so if the if these insurers invested more than 10% of their assets into the Dodgers and other entities that are Mark Walter's, you know, under Mark Walter's control, then you know they are have been in violation of that law as well. And so there's a whole series of provisions potentially that that are at issue. And that's before
Jake: Yeah.
Andrew: that's just the Delaware insurance law alone. Again, we don't know if there are potentially other issues that have come up in the federal investigations.
Jake: Yeah, that's really well said, Andrew. A and just to get for everyone's edification here, Mark Walter has a a lot of hands in the sports business. So even though he's in the process right now of selling the Lakers, he still holds the Los Angeles Dodgers, as he mentioned, the WNBA's Los Angeles Sparks, the Premier League team Chelsea, the League 1 team Strasbourg that's in France, the Cadillac Formula One team, Andretti Global, that's motorsport, and the entire PWHL that's women's professional hockey league. He has he he owns the entire league. So you know, we don't know the extent of this and exactly what where exact where exactly it begins and ends, but you could imagine here that the consequences of this could be potentially enormous and impact a lot of his other holdings.
Andrew: Yeah, so the Delaware insurance law provisions I discussed alone. You know, the the sanctions provisions related to those laws state that, you know, there's a variety of different things that could happen. One thing that could happen is that the regulators could force him to unwind those transactions. And another thing that could happen is he could be fined. And then perhaps most dramatically, if it's proven, you know, if a prosecutor like, you know, proves at trial that these violations were done willfully and with intent. to deceive the state of Delaware's insurance regulators, prison time is listed as one of the possible sanctions that that is punishable under these laws.
Jake: That's that's pretty substantial here. So in terms of potential, I guess, r I mean, remediation efforts, is it possible if Walter you know, let's just say for instance that this twenty billion has to actually get repaid somehow, okay? If he does that, does he go scot-free? Is that a possibility? Or are there gonna be further penalties involved with here? Or do we just not know?
Andrew: So it it it's it's difficult to say, but even let's take this hypothetical situation where Walter successfully raises, you know, all this money in cash, pays off all of these loans, and then the insurer no longer has any affiliated investments, then it would still have been the case that the insurers were out of compliance with
Jake: Mm-hmm.
Andrew: these various provisions, you know, during this time period. And so there y you know, depending on on I think what prosecutors and regulators want to do, you know, if it was the case that these provisions were violated at any point in the past couple of years, then barring any sort of statute of limitations issue, then that would still be prosecutable.
Jake: Okay. Are there any arguments here Walter and his companies can make that could, you know, absolve him of any liability?
Andrew: So I think for for for Walter specifically, you know for the criminal cases, you have to prove intent. And proving intent is always difficult. And you know, depending on how many layers of management there are in between the insurers and the ultimate controller, Walter, then that gets more difficult. So you My understanding from the reporting is that, you know, they're stating that these issues, you know, were accidents, that, you know, Walter was not aware that the insurers were out of compliance with the affiliated transaction disclosures, you know, that this has been one big mistake and that they're, you know, working to remediate all issues very quickly. So I I think that that would that would have to be like the the sort of argument that they would go with if charges were to be filed.
Jake: Okay. Alright. Is that the same case with the SEC?
Andrew: it's it's frankly not entirely clear to me what the
Jake: Okay.
Andrew: SEC's role is here. It depend
Jake: Yeah, I I'm not sure either. So that's that's what I wanted to ask you, yeah.
Andrew: so it's it's it's interesting. Most insurance products are not securities. And so you would think that a lot of this is not under the SEC's purview, and because the SEC has jurisdiction over securities fraud. However variable life and variable annuity products do have this unique regulatory position where they are simultaneously regulated as insurance products by the state level insurance regulators, and they're regulated as securities by the Securities and Exchange Commission. So, I mean, I I I I have no special knowledge about what the what the SEC is interested in here, but to to the extent that variable life and variable annuity products are at play, then and or also if there's interplay between you know the insurers and investment funds, investment funds are also regulated by the SEC. And so those are, you know, potentially things the SEC might be interested in.
Jake: So this intertwining here, this intermixing of private equity and insurers, if I am a policy holder, what should I be concerned about here in particular when it comes to this self dealing?
Andrew: So when you're an insurance policy holder, you even though you may not think of yourself as such, you are a creditor to this life insurance company. You show up on the balance sheet of this life insurance company as a liability or rather an actuarial liability because you have paid that insurer money. And in turn, that insurer has made you a contractual promise. If you're a life insurance policyholder, they've made a promise to pay out to your beneficiaries if you die while the contract is active. And if you're an annuity policy holder, you have been made a promise that you're going to receive payouts and other kind of hedging transaction services. So, in order for the insurer to make good on these promises that it has made to you, you know, that realize a very long time in the future, that insurer still has to exist. And so if the
Jake: Yeah.
Andrew: insurer has gone insolvent, so barring the insurance law, let's just imagine a world in which there was no law. If if the insurer just went down, well then you just lose all of your money that you have been paying in your for potentially quite a long time in terms of your premiums and you get nothing. And so what you have is a situation where it's very important That an insurer remains solvent for very long periods of time, which means it needs to be very conservative in the risk that it takes with its assets. If the insurer is doing things like concealing the true nature of its investments from regulators, if it is investing into high risk assets, if there is a risk potentially that The controller of the insurance company is using the insurer to get preferential access to loans and investments for their other businesses, you know, and making those decisions based on wanting to direct money to their other businesses rather than what's ultimately best for the policyholders, then that is putting you, the policy holder, at risk.
Jake: So in in essence then all of all the risk you say it goes then on the individual, which is a really unfortunate situation for them.
Andrew: Yes. And the way that the life insurance regulation in the United States tries to deal with this risk is this two-pronged approach. What they do is they provide a certain kind of backstop to policyholders in a somewhat similar way that banking depositors are backstopped by the Federal Deposit Insurance Fund. And then The other prong is that they impose financial regulations on the conduct of an insurer. So for example, the requirement that affiliated transactions have to be disclosed is like one such financial regulation where they are trying to do things that will reduce the amount of risk that the insurer is taking.
Jake: Okay. Based on your knowledge, Andrew, do you think that the current laws in place are adequate to protect the individual policy holder from this type of risky investment or do you think more is needed?
Andrew: In this case, they clearly failed. You know, the Delaware insurance regulator, you know, did not you know, permitted this to occur for quite some time. So that indicates to me that the way that the enforcement of the affiliated transaction disclosure laws is is you know certainly less than perfect. And I think a lot of this has to do with the fact that you know these life insurers they have very large balance sheets, and state level regulators have very limited resources and they're trying to, you know, prioritize you know certain things, and they just don't have the bandwidth to try to survey whether every single asset that every single life insurer reports to them was filed properly. You know, and so we have here this really extreme situation where half of an insurer's balance sheet was improperly classified. And it took a federal investigation, a federal criminal investigation, to get this insurer to notify the regulators about this issue and take corrective action themselves. So, you know, I I think it's it's a very difficult position that a lot of these regulators are in, but I think there's there's two main problems. One is the ability to enforce these laws is very limited, and two I think is the problem of the laws themselves not being strong enough.
Jake: X yeah, yeah, I fully agree with you on that. And it also seems like like the the problem either like you go down here for that it's also like two pronged in the sense that on one hand, like the real issue at stake here was that you know the disclosure never really happened in the beginning. And fortunately it was caught later. So in that instance like the system kinda worked, but like you need I I I think there needs to be more bite behind the disclosure requirements to begin with here to then make it easier for the regulators to review later. So like like like there were multiple steps here in which the process didn't fully work the way it should. Fortunately it it was caught eventually but like you said this never really should have happened in the first place, correct? If i i i if ever
Andrew: Yeah, but
Jake: if everyone was doing their job properly this this would have been stopped right at the beginning is what I'm saying.
Andrew: Yeah, I you know, and and who knows how long this would have gone on if not for the federal criminal investigation.
Jake: Yeah. Yeah. Th that's really well said. And again it just high this investigation by the way here is pretty serious on lots of levels here back in Where was this? yeah. In September 2025, the FBA ac the FBI executed a search warrant and seized Mark Walter's mobile phone and a laptop from a private plane at Chicago's Midway International Airport. So they literally stopped and got that material from him. Then additional warrants were also executed around the same time. What's really noticeable about this with the Mark Walter situation here and how it pertains to sports and his sports businesses is that this isn't the first time actually that Mark Walter has faced some legal issues with regard to what his related insurance companies are doing. So back in February 2014, there was this proposed class action lawsuit that was filed against Guggenheim Partners and against Walter and other of his affiliate companies. And among those allegations here were that essentially that he was obscuring affiliate investments, which Sounds pretty similar to what he's being investigated
Andrew: Yeah.
Jake: now. So like history has repeated itself here. I don't know how much you know about that particular lawsuit, Andrew Andrew, because based upon our understanding of it, that that lawsuit was essentially dropped the very next day by those who brought it. So presumably y you have to think they were probably incentivized to do so. Like we don't know what that is, but lots of times like like you know, plaintiffs don't just you know, drop a lawsuit the day after they they submit it unless there's something else that's going on there. But it this does seem to be kind of a like I said, a pattern here of behavior that is pretty concerning on Mark Walter's behalf.
Andrew: Yeah, you know, potentially there was some sort of like quick settlement to, you know, get these plaintiffs to drop the case. You know, it's interesting. Walter has put out a statement in in which he at one point claims, you know, no one has actually been harmed and also nobody has even claimed that they were harmed. but you know, people filed lawsuits over over this kind of behavior. So I think that would in my view, qualify as claiming that they have been harmed.
Jake: I I I fully agree. A and what again I find so interesting about this as well, about that 2014 lawsuit, is that of course preceded Walter's buying of the Dodgers and Walter's buying of the Lakers. And When it comes to all these sports leagues, the sports leagues offices have actually very little responsibilities. Lots of times the owners vote on things. The owners pretty much decide what happens with the league. But one thing that is very much within the purview of league offices is conducting the diligence to decide whether or not they can give the owners the okay that they can invite a new owner into the league, that that this that this team's sale could actually be approved. So when I look at this and I see that this 2014 lawsuit was filed, that's at least a yellow flag. And the fact that both the both Major League Baseball approved Walter being an owner and buying the Dodgers, and then the NBA approved Walter in being an owner and buying the Lakers, I have to think that moving forward here that these sports leagues as a whole are gonna have to completely change their diligence requirements, their diligence efforts moving forward, because it seems they likewise kinda dropped the ball. What I'm saying is essentially like they kind of act as their own regulators too, and similar to Delaware,
Andrew: Yeah.
Jake: they didn't do what they were supposed to do.
Andrew: Yeah, it and I think, you know, not not not that I know a whole lot about like
Jake: huh.
Andrew: what is going on in sports leagues, but my understanding is that a lot of these pro sports leagues have in recent years loosened their ownership requirements and large
Jake: Yes they have, yeah.
Andrew: investment firms have become at least part owners or the backers of a lot of different, you know, new owners over the the past decade or so. So If now sports teams are going to be owned, you know, less by you know individuals and more by these large consortiums, particularly you know consortiums where the the consortium itself is backed by this investment fund that is itself backed by you know limited partners, then we're multiplying the number of people that these sports leagues would could c you know have to look into quite substantially. And you know, with all of that comes the increased possibility for you know legal exposure or or histories that that might an invite you know further inquiry.
Jake: Exactly. Yeah. So it's gonna create a lot more work for these leagues moving forward. And I th I have to think, you know, just focusing back now on like the federal investigation, that this Mark Walter situation is gonna have to usher in at least somewhat of some sort of new regime, a regime change at least when when it comes to federal enforcement. I don't know exactly what that is and you might not know either, but I feel like this really is kind of like an instance in history where people are gonna say, boy Like we really we really dropped the ball on this and we can't have this happening moving forward.
Andrew: Yeah, I I think it de dep depends on on exactly, you know, how things turn out. whether ultimately criminal charges are filed. certainly it's the case that high profile sports team owners have been in in legal hot water before. but I think, you know, what makes this potentially a bit distinctive is the way in which The team owners' actions that are in dispute relate to their financial management of the team itself and are not is not just like behavior that occurs, you know, theoretically, like you know, off the field per se. Because the issue in in this situation is that a lot of these loans and investments that these insurers were making went to the Dodgers and entities affiliated with the Dodgers, like, you know, the kind of dealing with things like TV rights and stuff like that. And it's endlessly debatable, you know, to what extent these were sound investments or or not. But the the fact is that they, you know, were not you know disclosed properly and some some would say were concealed intentionally. So it it's it's it's difficult to say. But there's certainly a I think a lot of a lot of clouds.
Jake: I I appreciate your phrasing there too, 'cause I th there's a paper trail here and where exactly that paper trail ends is still unclear and how exactly intermixed it is with the Dodgers is unclear, but it it is noticeable that with all this self-dealing going on, the Dodgers could potentially be in a a house of cards. They may or may not, but they could be. And as you also rightfully noted here, the the Dodgers are potent are the most important of the franchises because, as as MLB fans could know quite well, there is no salary cap in Major League Baseball compared to where there is in the NBA, for instance. So when there's no salary cap in This is a big issue right now going on with Major League Baseball in the Players Union and the most likely what's going be an impending lockout coming next year, is without a salary cap in place, these teams like the Dodgers that keep spending, spending, spending, and accumulating more and more and more talent, which of course the Dodgers have done they've they've been extremely successful at that, as you know World Series champions here, compared to other teams whose payroll is much, much smaller. But that being said, regardless of whether you like not having a salary cap or not, if i i if they're skirting the rules essentially and self funding this and there's actually no real money behind it, that is extraordinarily problematic.
Andrew: What's interesting to me is one of the things that's interesting to me is that you know the previous time my attention had been drawn to you know the financial engineering surrounding the Dodgers was the Shohei Ohtani contract, which
Jake: Mm-hmm.
Andrew: displayed a lot of you know kind of creativity in using a really, really backloaded deferred comp structure. To try to leverage the discounting and present value rules in the kind of ML MLB's like kind of pay pay structuring and and and penalties on overall team spending. And so it it it seems to be the case that you know maybe part part of the kind of culture of this organization on the management side is to like pursue these pretty aggressive. you know financial engineering's and both and you know and we we saw that first or or at least publicly at first with the Ohtani contract. but it seems like the back end of a lot of the organization itself is also employing these like aggress aggressive you know kinds of financial structurings.
Jake: Exactly. Yeah. A and and to be clear, the Dodgers are not the only ones who do that, but the Dodgers appear to be the ones that do it most forcefully, let let's say. And it's not just with the Ohtani contract, but with other contracts they have as well. So yeah, I I think again that you really spotlight how like like if the right dominoes fall here This this investigation with Walter could have a lot of unintended consequences and could potentially and I don't I don't want to get too far ahead of ourselves here, but I mean this could potentially force a selling off of sorts of other sports assets that Walter has. And if that were the case, I mean, like you would look at it in absolute feeding frenzy here for others bidding on these sports. So like on one hand, it w it could be a fire sale of sorts, but it might be one that he actually profits off of, despite the fact but i it is extraordinarily problematic here because these leagues also have particular rules as well, in terms of like you said, you know, the amount of ownership and like how much actual money do these owners have, 'cause that's obviously very, very important. but if this whole thing it truly is just a a castle made out of sand and it's getting blown away by the wind and getting battered by the waves here, Walter is in a ton of problems.
Andrew: Yeah, I think that something that is is proving to be very helpful to Walter here s pretty bright. I'll is the fact that he is so exposed to pro sports as an asset class at the a perfect time, you know, a
Jake: Mm.
Andrew: time when valuations of these assets are skyrocketing. You know, he's managed to, you know, book a $2.5 billion gain on the Lakers in less than a year. he did he didn't own 100% of the Lakers, but the overall valuation you know went up by 2.5 billion. And So, in in a sense, that might ultimately be what helps to stabilize the insurers. Ordinarily, in a situation like this, there is a there would be a big problem because if there's suspicion cast on the assets of an insurer, and the insurer needs to unload those assets very quickly, then there's an issue where you know these assets are. considered suspicious and so potential buyers don't really want to buy them
Jake: Mm-hmm.
Andrew: or they wouldn't perhaps insist on substantial discounts to buy them. And of course, you that comes at the worst possible time for an insurer who is like trying to raise cash and trying to get assets off of their balance sheets. And that's what leads to a a situation that that you know would call some people would call a fire sale. And what reporting seems to indicate is that Mark Walter is not trying to sell a lot of these, you know, affiliated assets to third parties, but Walter is instead, you know, doing a two-pronged approach. One is that TWG is performing, according to reporting, I believe it's a six point five billion dollar asset swap with Delaware Life. And two is that Walter Is raising a tremendous amount of money very, very quickly by selling his sports assets and gaining liquidity that he can use to pay back the loans directly. So the selling of the Lakers is the big marquee sale so far. There's also reporting that he is in talks to sell his interest in Chelsea. After that, You know, like a lot of these other assets, like I I don't know how much like the you know, his interest in in these F1 teams, for example, are going to bring in. I assume not as much as selling the Lakers. The the big remaining marquee pro sports asset that he has access to is the Dodgers. And he and the team have been very insistent that they are not selling and that, you know, basically i the attitude is like over my debt. And you know, whether he will or or will not ultimately have to sell the Dodgers, like I have no idea. they they certainly are are stating that that's not going to happen. But you know, one way that Mark Walter has found to try to get these affiliated assets off of these insurers' books is to just raise a tremendous amount of money from This marquee asset class, and then make these direct repayments to repay the loans.
Jake: When it comes to these repayments, Andrew, is there a certain timeline he has to do that by?
Andrew: I'm not sure. I think likely it's the case that he and the Delaware regulators and potentially, you know, the DOJ and SEC are are coordinating on this sort
Jake: Uh-huh.
Andrew: of thing. Certainly the speed of the Lakers transaction indicates
Jake: Which was very sudden. Yeah, yeah.
Andrew: yes, cer certainly that indicates that, you know, they're they're hustling to to to get these sorts of things moving. But but I I don't believe it's been reported if there are any sp specific timelines, though I'm not sure.
Jake: Yeah, I I'm not sure either, but I think you hit on the head that that what we have to understand is that Walter is defin Walter's camp is definitely in conversations with the federal government's camp and any other investigators' camp on this, that that that there probably is some sort of understanding being worked out, at least in regards to some of this. Now, you know, may maybe with that comes, you know, sub agreement that maybe federal charges won't be pursued, maybe, maybe not. But you have to realize here that th that there are definitely conversations happening behind closed doors that we're not being privy to that. could very much impact the final result here for Walter and whether or not he is gonna f see the need to potentially offload any of his other sports assets.
Andrew: Yeah, I believe in the statement that TWG put out, they said that they have a plan with the Delaware insurance regulator to get rid of all of the affiliated asset exposure of the insurers. And so, you know, that takes a tremendous amount of work. They I they didn't specify how exactly that is going to be done, but you know, potentially that can involve, you know, sales of these assets to third parties. But it certainly seems so far that the main thing that is happening is related party transactions that reverse the previous undisclosed related party transactions.
Jake: Mm. Whi which could you know in and of itself create more problems potentially.
Andrew: Well well in this well in this case they're you know, they're in they're doing full reverse to in consultation with the with the regulators.
Jake: Well,
Andrew: but yeah, there's a there's an irony to the to this definitely.
Jake: Yeah. That's that's what they're try they're trying to
Andrew: Yes.
Jake: do. An Andrew, th thank you so much. This has been extremely informative. Is there any other aspect of this investigation that we haven't covered that you'd like to talk about?
Andrew: I think the last thing that I would say is that the ultimate backstop for a lot of life insurance policies is actually taxpayers. And if a life insurance company goes insolvent, you know, potentially because the insurer does a poor job managing the assets and then they lose a ton of money and then no longer have the money to pay policyholders, a lot of state law. Works through these mechanisms called insurance guarantee funds, which ultimately cause taxpayers writ large to be on the hook to bail out the policyholders of an insurer that fails. These mechanisms exist to protect policyholders, but they also have potentially adverse consequences because they You know, they they mean that like insurance policyholders who already are not in a good position to try to monitor what an insurer is is doing with their money also just have very little incentive to monitor what an insurer is doing with their money. And so you end up with this trade-off where policyholders get protected, but also, you know, the life insurance company knows that this apparatus exists. And they know that they get to keep the upside of risky investments that they make, but that the downside of risky investments that don't pen out will ultimately get socialized out to other people.
Jake: Mm-hmm.
Andrew: So, you know, in extreme cases, if an insurer were to actually go and solve it because of you know, you know, investments that don't work out or something else, it you know, a lot of People will ultimately have to pay for it, not just the direct counterparties involved.
Jake: And that's the part that really sucks. 'Cause those who are essentially innocent in all this, could be the ones that are actually hit the hardest.
Andrew: Yeah, I I think, you know, the insurance regulation takes the position that okay, you get to have all of these backstops, but in return, we're going to try to limit the risks that you take, because in a sense you're gonna you're playing a bit with house money. And so y you know, i an irresponsible insurer has incentive to do things like invest in in really risky things and you know, not tell anybody about what they're doing and maybe try to use the insurer to benefit other businesses that the controllers have. And I think it's obviously it's a shame the situation that's happening, but in in a sense I'm glad that it's drawing attention to these issues because they're very important and and a lot of the moves that a lot of private equity firms have been making In the life insurance industry, you know, they're not accused of the same failure to disclose affiliate transactions that Mark Walter is. but they are using, I think, a analogous business model where they are merging in a life insurer to make increasingly risky investments.
Jake: How how prevalent is that practice, Andrew, across the board?
Andrew: Life insurance companies, you know, it's estimated that about a trillion dollars worth of life insurance assets is under the control of private equity right now.
Jake: Wow. That's definitely something you should consider, I guess, for anyone seeking insurance at the moment. A and like you said as well, it it's like unfortunately, in order to shine light upon something, lots of times something bad has to happen first. So I guess I mean, hopefully a positive will come out of this again that there has to be, I think, some sort of you know, regulation change here. I g I don't know what exactly what that might be and it's probably gonna take some time to do so, but I think this really is a moment where a lot of people within the government need to wake up and realize that this could have a lot of consequences down the road for the uh taxpayer and for the citizen.
Andrew: I agree.
Jake: Yeah. Yeah. so Andrew, just l let's talk a little bit about you here for a second, man. what are you teaching right now at U T?
Andrew: I'm teaching a seminar on specialty kinds of business associations. Actually I have two units in this class. One is on private equity funds and another is on insurers. So in a few weeks I'll get to speak with students about like the underlying business model of of PE funds and also the underlying business model of insurers, and that's something I'm really looking forward to.
Jake: That's particularly timely. And I think I also saw that you are part of an insurance law workshop at UConn, is that correct?
Andrew: Yeah, so I'll be pr so I wrote a paper with Pranjal Drall called Private Credit's State Backstop, and the which is about this new business model that private equity has developed. And so I'm presenting that paper at a series of of conferences, and one workshop that I'll be presenting the paper at is at a UConn insurance workshop that is open to the public. And so if people are interested, they can Google around for the insurance law workshop and sign up to to you know watch it on Zoom.
Jake: That's awesome. Yeah, so yeah, I highly recommend it like if you enjoyed this conversation with Andrew, please, please do that. lastly, Andrew, where can people follow you on a social media if they want to get more of your insights?
Andrew: I'm on Twitter at agranato42 where you know I I talk about life insurance, private equity, movies,
Jake: Mm-hmm.
Andrew: thing you know, things of such nature.
Jake: I I think there might be I mean, i if this investigation goes any deeper there might be Mark Walter film, you know i in in the near future.
Andrew: Yeah. I I I look forward to my inevitable future of being the professor talking head in a documentary twenty years from now where I say like we all knew how what was going to happen. and yet
Jake: Yeah. Well well I I very much on one hand look forward to that moment and also do not look forward to that moment because that means that it was really, really bad. But Andrew, thank you so much for coming on. I I I hope this was able to really highlight a little a a little more for our viewers and for the audience here to understand the nuances of this investigation and also that this could have, like I said again, lots of potential effects here down the road. And again, we don't know what the timeline is of this yet, but this is something that I assure you that both the federal government And sports leagues, the head of sports leagues are paying a very particular attention to. So thank you, Andrew.
Andrew: Yeah, thanks for having me on.
Jake: Have a good one.
Andrew: You as well.
Jake: It's now time for Jake's Takes. Last week there was the sad news of the passing of Bill Rasmussen, the co-founder of ESPN. He was ninety-three. It goes without saying Rasmussen was instrumental in shaping how sports is consumed on television and other media outlets today. Back in the 1970s, he envisioned a cable network that would cover Connecticut-based sports. This was when cable television was still very much in its infancy. It wasn't clear whether the cable model was financially sustainable, nor whether Americans would be willing to adopt it. Plans shifted from a regional station to a station being broadcast across the entire US and covering sports on a national level. So, ironically, even though it was called cable TV, it was highly reliant upon satellite communication. ESPN made the very wise decision in hindsight to quite early strike up an agreement with the NCAA, and those ties, of course, have strengthened ever since. ESPN greatly relied upon outside investors, and those investors in turn essentially sidelined Rasmussen and quite shortly thereafter forced him out. Over the decades since, ESPN offered an olive branch to Rasmussen, and they appeared to be on better terms with each other, with Rasmussen frequenting the British the Brit the Bristol campus. But remember, none of this here happens without Rasmussen. The network's relationships with all the major US sports leagues all sprung out of this flipping of the switch. Likewise, the iconic SportsCenter studio program made the careers of countless individuals. It is sad, ironic, and in some ways oddly fitting that both Ted Turner and Bill Rasmussen passed away this year, just months apart from each other. Both were visionaries. CNN began broadcasting June 1, 1980. ESPN first hit the airwaves a year earlier on September seventh, 1979. Both channels were mainstays, the destination for their intended audiences. If you wanted breaking news, you tuned to CNN. If you needed a sports fix, ESPN was your number one choice. It is frankly incredible how prominent both of these networks became and how quick that rise was particularly since it was far from guaranteed that they would succeed. Rasmussen passed away the same year his company, ESPN, began its year long promotion of the first ever Super Bowl broadcast that it would have, something certainly even he would not have envisioned when this venture first took off. The selling of sports franchises continues. Last week news broke that the NFL's Atlanta Falcons had reached an agreement to sell a ten percent stake to private equity firm Arctos pending league approval. With it comes a valuation of around ten point six billion dollars. The very next day it was announced a change in controlling ownership was taking place with the NBA's Minnesota Timberwolves and the WNBA's Lynx, with the combined value of those two teams being around $4.5 billion. Mark Lore has agreed to sell his controlling interest to Mark Stad. Stad was already a limited partner, having joined as part of the Lore-ARod ownership group. Mark Lore and Alex Rodriguez originally agreed to purchase the Timberwolves and Lynx back in 2021. However, a dispute arose between them and then owner Glen Taylor. Arbitrators eventually ruled in favor of Lore and Arod. In 2025, at which point those two assumed ownership. Now in 2026, Lore steps out of that role. Some takeaways from these news items. Private equity's role in sports business continues to grow, and that shouldn't be surprising. As valuations of sports franchises continue to rise, there are few individuals wealthy enough to afford a controlling stake. Financial institutions are quickly becoming the preferred and perhaps soon only realistic option. The mom and pop days of team ownership are definitely in the past. The major sports leagues in the US have rules, of course, limiting how high a stake a team can have with private equity, how much private equity can hold within that team. But one has to assume that this limit will be increased in the near future because it essentially has to. The Falcons being valued around 10.6 billion also underscores that, relatively speaking, the Seattle Seahawks, despite being the reigning Super Bowl champions, are not as desirable as a franchise. The Seahawks sale valued the team at 9.6 billion, that's 1 billion less than the Falcons now. Atlanta is a larger TV market, it's on the East Coast, and has a stronger media presence because of its history. The Falcons, of course, have not performed nearly as well on the field as the Seahawks have in recent years. So on-field performance clearly isn't a determinative factor as to price. It can't hurt to have titles, but it doesn't help as much as one might think. Worth highlighting: We now have two instances in the NBA of controlling ownership very quickly changing hands after the team was just sold in the Lakers and the Timberwolves. Now the circumstances may vary, but it doesn't change the fact that these franchises are essentially being flipped like houses. Yes, every time these teams exchange hands the valuation goes up. And that's understandable. But it's not a good thing to have this amount of instability with leadership. Businesses, of course, prefer some consistency. In the NBA there have been eleven change of control sales since twenty twenty and twenty five of those since twenty ten. Four teams were sold twice during that span. The Lakers and Timberwolves, of course, but also the Bucks and Hornets. Buying sports teams, particularly in the NBA, is less of a passion project and more of a business investment. The question becomes, does this trend ramp up even further? In the NBA? Or does this pattern bleed over into other American sports? Bear in mind with the NFL, some of those recent sales were triggered by the passing of the owner. It was mandated as part of the estate. But the getting in and getting out, quickly mentality, if that were to hit the NFL, would create a whole new level of business drama. The San Francisco 49ers tumultuous offseason has gotten even worse. Team owner Jed York was arrested in Ohio for trying to pay for sex. This was part of a sting operation conducted by a human trafficking task force. York responded to a prostitution website and arranged a meeting with what he thought was with a sex worker. He intended to pay between $140 and $160 for the encounter. He was arrested at a trailer park in rural in the rural town of East Palestine. He was charged with one count of engaging in prostitution and one count of possessing criminal tools, that tool being the cellular device he used to arrange the illegal act. He pleaded down, reached a plea deal where he pled no contest to a charge of disorderly conduct and no contest to possessing criminal tools. So that's a five thousand dollar bail, another one thousand one hundred and fifty dollars in fines, and he had to serve one day in jail. So financially speaking, this was no skin off of Jed York's nose, but reputationally it is a very different story. Once again the spotlight is very much on the San Francisco 49ers organization for all the wrong reasons. Jed York's arrest comes a little over a month after head coach Kyle Shanahan's infamous car crash, where the team and Shanahan appeared to cover up several facts about the incident and only had to do in an about-face when several journalists dug up more info. Shanahan, it seems, has continuously changed his account of what happened, which hasn't helped matters. And now we have this even more public episode making national headlines. In addition to being the owner of one of the most famous NFL franchises, York serves on several of the league owners-led committees, according to the team's website, including the Stadium Committee, the NFL's owned and operated media businesses, business ventures, as well as fan engagement in major events. He, like everyone else involved in the NFL, is subject to the league's personal conduct policy. The NFL says they are reviewing the matter. That being said, if you look at prior incidents as involving team owners such as Patriots owner Robert Kraft and the late Colts owner Jim Irsay, there appears to be a bit of a double standard. Owners tend to not get penalized as severely as players would be for the same or similar actions. Whether York is punished in any shape or form is yet to be determined. Suffice to say, the 49ers' reputation, which already has taken quite a hit this summer, has somehow even eroded further. And here is the really astonishing part of this. As I said a couple episodes ago, see episode thirteen for more on the Shanahan incident, the 49ers are one of the highest valued sports franchises in the world. Jed York is a billionaire with almost unlimited means, something one of the arresting officers likewise noted, which you can hear if you want in the recently released body cam footage. York could easily hop on a p a private jet on his own plane and fly to any country where prostitution is legal and there are plenty of countries where that is the case. Or he could just cross state lines and go to a Nevada county where prostitution is allowed. Instead, he's shelling out $140 or so, responding to some crappy online advertisement like a bum. Now, he was born and raised in nearby Youngstown, Ohio, so that's the Ohio connection. But still, in addition to the illegal aspect of this, it is all extremely embarrassing. It also speaks to how people in positions of power, perhaps because they think they're untouchable, do incredibly stupid things. And York is going to have to answer for that. It has also come to light York filed for divorce from his wife back in May. That divorce has yet to be resolved. He cited irreconcilable differences and is seeking joint legal and physical custody of their two sons. So that also gets the public spotlight, which is unfortunate for the family. Super Bowl 60 feels like a very, very long time ago. Between the 49ers and the Mike Vrabel news, this has been an offseason sports fans won't forget for a long time. Real games cannot start soon enough for the league, because there's no denying this has been a very rough look for them. In September, the 49ers will celebrate the eightieth anniversary of their inaugural game their organization played. One could argue that this year, the year 2026, has been the worst year in team history, and the season hasn't even started yet. Shifting to Formula One, the speculation has subsided, at least for now. Red Bull driver Max Verstappen has signed an extension through the 2030 Formula One season. The four-time F1 champion certainly played hardball during these negotiations, but of course, given his extensive resume, he had every right to do that. While Verstappen's prior contract ran through the year 2028, there were performance-based exit clauses he could have exercised that would have allowed him to get out of the contract and join another Formula One team, such as Mercedes and McLaren, or compete in some other modus sport. Max also, of course, could have decided to retire. Now that might sound a bit extreme for such a prominent driver so very much in his youth, but Verstappen was extremely vocal in how frustrated he was with Formula One's current hybrid engine regime. Repeatedly in interviews he said how it no longer felt like racing and likened it to Mario Kart. Max was not alone in voicing opposition to this regime, but he was by far the loudest. Subsequently, Formula One made some tweaks to this year. and slightly altered their plans when it came to the internal combustion engine slash battery battery ratio for future years, but all these changes were pretty minor and far from what Verstappen had publicly called for. This then led to the question whether Max would indeed walk away. Loyal listeners to this pod will recall an earlier episode where Formula One commentator Nelson Valkenburg and I discuss at length the implications of Verstappen possibly changing Formula One teams or leaving F1 entirely. See episode 6 for that. And Nelson and I agreed if Max were to bid adieu to Formula One, it would be an enormous blow to the sport. Not a knockout punch, mind you, but it would certainly make Formula One quite woozy. Some reports have pegged Max's new contract at what 110 US 110 million US dollars a year when factoring in bonuses, which has almost double the 60 million a year he was making previously. The major question here becomes whether this new contract once again contains those exit clauses. Now, these exit clauses are pretty commonplace in F1 deals, particularly with drivers of Max's caliber. But you have to wonder whether Red Bull greatly increasing Max's Salary meant the team was able to issue those pesky driver-friendly exit clauses. Maybe, maybe not. What the exact language is in this particular case has not been reported. So there's no absolute guarantee Max is still driving for Red Bull come 2030. But this new contract should quell the barrage of rumors that have surrounded Max for the last couple of years. We also don't know what conversations Max may have had with Formula One leadership itself and the FIA about engine rules in future years. Maybe some sort of understanding was reached to entice Verstappen to stay. Maybe not. In the short term, Max staying at Red Bull means that we're not going to have a chaotic domino effect or game of musical chairs, which would have happened if he had changed teams or exited the sport. Most of the major drivers on the grid are either locked into contracts of their own or are extremely unlikely to depart their current teams. It seems for now at least the contractual drama that has taken place off the track in the past couple of years has mostly calmed down. While Verstappen's new contract was met with much fanfare, Max's first race after getting the extension did not go well. He crashed at the end of just the opening lap of the Dutch Grand Prix. Fortunately he was not harmed, but the incident does underscore yet again that this season has not been the smoothest of sailing for Red Bull. But now at least their future is a little more clear. This Jake's Takes began on a sad note, and will also end on one with the passing of Dolly Parton. The Queen of Country leaves us at the age of eighty. Dolly Parton had been involved in music her entire life. She started writing songs at the age of seven. Over the years she composed so many hits, including I Will Always Love You, which was a critical and commercial success by itself, and then Whitney Houston blasted it off into the stratosphere with her recording. Also, Jolene, Coat of Many Colors, and Nine to Five continue to this day to be iconic. She is one of the best selling music artists ever with over fifty studio albums. She also won eleven Grammy Awards and also received numerous accolades for her acting abilities as well. You simply cannot tell the story of entertainment or even the broader Americana without dedicating a chapter to her in her distinguished career in life. President Trump ordered that US flags be lowered for one week in her honor. The Empire State Building Tower Lights turned to a Pink sparkle at the night of a passing at 9:25. Parton was inducted into the Country Music Hall of Fame in 1999, the Songwriters Hall of Fame in 2001, and the Rock and Roll Hall of Fame in 2022. Dolly Parton was also an extremely active philanthropist. Her work was headlined by the Dollywood Foundation. Her Imagination Library has gifted more than 300 million age appropriate books to children across the world. There are numerous scholarships in her name to help young adults get an education. She donated $1 million to coronavirus research and millions and millions more to children's hospitals and disaster relief. In particular, assisting community. is impacted by the East Tennessee wildfires, Middle Tennessee flooding, and Hurricane Helene. She received the Carnegie Medal of Philanthropy in 2022. Tributes have poured in across the world for Dolly, but one that particularly stood out to me was Taylor Swift's statement. Taylor and Dolly had immense respect for each other, so this one felt particularly poignant. And here is part of it, and I quote. She was truly the gift that kept on giving. Dolly gave us someone to look up to while encouraging us to be who we are as individuals. Somehow she was able to give us her lessons about the world gently and honestly, simultaneously, and oftentimes hilariously. She managed to give the world the ultimate mystery and fantasy in some corners of her life, but to give full transparency in the ways that counted. Somehow she was true grace and true grit all in one dazzling person. She possessed the softest heart when it came to the struggles of others, and a backbone of steel to defend her own self worth as an artist. Along with her other fans, I am so grateful for all of it. For the melodies and lyrics she wrote that thawed even the coldest hearts, for the millions of books she provided children all over the world so that they might fall in love with the stories the way she did. For the tightrope she walked so that young girls like me could grow up dreaming of joining the circus too. Dolly, I'll think of you each step of the way. End quote. That was beautifully said by Swift and I cannot top it. But permit me to say this about Dolly. She was such a bright star and a friend and an inspiration to so many. And her star would now shine all the brighter. She was a phenomenal talent, and that talent was only eclipsed by her kindness and generosity. Dolly Parton dead at the age of eighty. We will always love you. And that concludes this episode of Pathway to the Podium. As a reminder, please check in on prior episodes if you've missed any of those. For the previous episode we had on Big Sky Commissioner Tom Wistrcill. And in the Jake's Takes portion of that episode is my initial reaction to the Lakers sale news if you want to hear that. Other recent episodes include my coverage of the ESPN layoffs and Kyle Shanahan's car crash. Sportico's Eben Novy-Williams on the Seattle Seahawks sale, which by the was just approved by the NFL a few days ago. And the economic sustainability of professional cycling. You also have on the Wall Street Journal's Joe Flint on NBCUniversal getting spun off from Comcast and where things stand on the planned Paramount WBD merger. And then as well, we have The Sports Video Group's Brandon Costa going behind the scenes of a FIFA World Cup broadcast and providing information on how drone technology and scorebugs work in Broadcasting. So please subscribe, follow, and like this podcast on social media if you haven't already. You really should. I would appreciate it. video episodes of this pod are available on both Twitter slash X and YouTube. On Twitter, that's at JakeAKline, that is J-A-K-E-A-K-L-I-N-E, and at PathwayToThePod. On YouTube, that is at PathwayToThePodiumPod. You can also follow on Instagram and TikTok at pathwaytothepodium. Jake Kline wishing you and yours a good week. Bye everyone.
