New Los Angeles Dodger Ownership's Use of Insurance Funds Raises Concerns

"A quick background check and some back-of-the-envelope math raises an obvious red flag: how on earth can this group of individuals afford to pay $2 billion in cash? The answer is that they probably can’t — at least, not by themselves. Mr. [Mark] Walter, along with his colleague Todd Boehly, Guggenheim’s president, appear to be living out a childhood fantasy using other people’s money, some of whom may not even realize it. "

Last week, Tom Verducci wrote about concern of some owners over the lack of a more detailed purchase and sale agreement. It was noted that there was concern over what was then termed “institutionalized” money in the bid by the Guggenheim group, meaning funds not coming from private individual investors.

Mr. Sorkin fills in some gaps there, and expresses concerns over what is essentially a use of insurance premium funds from Guggenheim subsidiaries as private equity funds. These insurance companies can be state-regulated and must meet certain reserves, so we must be talking about the additional funds that the companies then invest to grow more profits. The problem is that these funds are typically invested conservatively and with diversity, and the investors want to see a profit. As Sorkin notes, though, some comments from Mark Walter a few weeks ago call into question the propriety of using these private funds (not specifically raised for this purpose) to purchase a team:

"“I don’t want to realize a return on investment on buying the Dodgers. I want to have a multigenerational relationship that changes my life, Magic’s life, Magic’s grandchildren’s lives and all of our lives.”"

He may not personally want to realize a return, but shareholders of those funds might. Sounds shady. No wonder they wanted a public figure like Magic to be out front and engender positive vibes. We’ll have to see if this deal holds up as the process continues.

[photo via US Presswire]