Speaker 1: Hey, handbook heads, it's haz well. I went and did
Speaker 1: it again. I went and started a local news company.
Speaker 1: Will I ever learn? It's called La Material. We've got
Speaker 1: a new podcast. It's called La World. We take three
Speaker 1: big stories from what's going on that week in LA
Speaker 1: and we pick them apart, we explain them to you.
Speaker 1: It's a fun show. I decided to drop it in
Speaker 1: here for you to listen to because I thought you
Speaker 1: might enjoy it. And also because when we launched, we
Speaker 1: were in the top two hundred news podcast for one second,
Speaker 1: and I gotta get back in there. You know how
Speaker 1: important that is to me. And so this is an
Speaker 1: excerpt from the show, talking about sports. We're talking about
Speaker 1: the Lakers and the Dodgers and financial alleged crimes. I
Speaker 1: hope you listen to it. I hope you subscribe to
Speaker 1: LA World, even if you don't live in La. We
Speaker 1: all love stories. Give it a chance. I think you'll
Speaker 1: like it a lot. Thank you so much, always appreciate
Speaker 1: all your support all these many years. Thank you, thank you,
Speaker 1: thank you. This is LA World. Hey sports sports man,
Speaker 1: oh man, is it ever sports today? So this story
Speaker 1: is about the Lakers and the Dodgers, two of maybe
Speaker 1: the five most important teams in American sports and obviously
Speaker 1: in the cultural map of la Like there's nothing bigger
Speaker 1: than these two teams. Until last week, they were functionally
Speaker 1: owned by the same guy, Mark Walter, a nuclearly boring businessman,
Speaker 1: but he's from Chicago, and until last week he owned
Speaker 1: a controlling share of both teams. He bought the Dodgers
Speaker 1: in twenty twelve and the Lakers just last year, in
Speaker 1: twenty twenty five. But Mark Walter got less boring a
Speaker 1: few weeks ago when it was reported that his business
Speaker 1: empire was being investigated by the federal government. What for,
Speaker 1: let's lock in well, I explained, intricate financial complexities, no
Speaker 1: hitting the fifteen second back button. So, in addition to
Speaker 1: sports teams and other businesses, Mark Walter owns two insurance companies.
Speaker 1: Those insurance companies are called Delaware Life and Clear Spring.
Speaker 1: Walter's business empires under the Gougenheim umbrella. It owns two
Speaker 1: insurance companies. Insurance companies sit on a ton of money.
Speaker 1: Millions of policy holders are making their payments. They usually
Speaker 1: don't get their money back for a long time. These
Speaker 1: insurance companies specialize in annuities, which are basically retirement funds.
Speaker 1: So in the meantime they have Scrooge McDuck coinpool of
Speaker 1: policy holder money that they're just sitting on. So what
Speaker 1: do they do with that money? They invest it. That
Speaker 1: is how these companies make money. Sometimes they invest in
Speaker 1: other companies under the same ownership umbrella, basically distributing loans
Speaker 1: around the business, and that is pretty normal. These are
Speaker 1: called related party transactions. They're just supposed to be reported
Speaker 1: because investors need to know if if too much risk
Speaker 1: is being gathered under one umbrella empires fall. You want
Speaker 1: your risk to be, you know, distributed across multiple places.
Speaker 1: And the companies have been reporting that a small percentage
Speaker 1: of their loans, their investments were to these related parties,
Speaker 1: three to five percent. They were saying, we're going to
Speaker 1: Mark Walter related businesses. Then the federal government starts looking
Speaker 1: into this and the insurance companies report that oops, they
Speaker 1: say the related party transactions were actually more like forty
Speaker 1: or fifty.
Speaker 2: Percent, a lot bigger than there.
Speaker 1: That's a lot bigger than three to five percent. In
Speaker 1: the case of one of these companies, half of their investments,
Speaker 1: we're going out to other businesses in the Walter universe.
Speaker 1: So in total, about twenty billion dollars worth of policyholder
Speaker 1: money going out to other businesses and market Walter's orbit
Speaker 1: that were incorrectly reported as being loans to unrelated companies
Speaker 1: and kind of funneled through SPV special purpose vehicles companies
Speaker 1: that only are propped up to pass this money through
Speaker 1: to other Walter companies. Okay, this was part of a
Speaker 1: larger investigation, the result of a larger investigation that also
Speaker 1: involved the FEDS raiding a private plane in twenty twenty
Speaker 1: five taking Mark Walter's phone, also taking give me that,
Speaker 1: Give me that. They also took the phone of the
Speaker 1: president of his company, Goggenheim Investments, on the same day.
Speaker 1: This is not boring. This guy suddenly is becoming a
Speaker 1: very intriguing figure. Then it was announced last week that
Speaker 1: Mark Walter decided to sell the Lakers, the team that
Speaker 1: he had bought one year earlier at a ten billion
Speaker 1: dollar valuation. Now he's selling it to Bob Eiger and
Speaker 1: Josh Kushner at a twelve and a half billion dollar valuation.
Speaker 1: So now people are really starting to poured on this
Speaker 1: federal investigation. It used to email people are what's going on?
Speaker 1: You know, some like financial thing. Is this really a
Speaker 1: big deal? Selling the Lakers after one year like implies
Speaker 1: that this is pretty serious, And there is a lot
Speaker 1: of speculation that the sale was to free up assets
Speaker 1: in Walter's business, especially that it's it's been reported that
Speaker 1: Walter is going around trying to scrounge together some money
Speaker 1: to cover these loans that he made from his insurance companies.
Speaker 1: So before we launched this podcast last week, we recorded
Speaker 1: a few dry run episodes where we actually we dug
Speaker 1: into stories, we talked about them as if we were
Speaker 1: doing a real podcast, and we talked with each other
Speaker 1: to kind of test this format and make sure that
Speaker 1: the cameras worked or whatever, which they didn't a lot
Speaker 1: of a lot of time. You are my witnesses that
Speaker 1: I did a segment about out the investigation into Mark
Speaker 1: Walter weeks before weeks he sold the Lakers, And if
Speaker 1: we had launched a few weeks earlier, I could have
Speaker 1: looked pretty smart. You could have really put one over,
Speaker 1: ignoring the fact that in that test episode you Julia
Speaker 1: asked me how this could affect the Dodgers and Lakers,
Speaker 1: and I said not probably not much.
Speaker 3: We could have cut it before that, that's true.
Speaker 1: So I'm not going to get infinite chances to look
Speaker 1: smart of this thing. So today we are getting ahead
Speaker 1: of this story and we're going to talk about how
Speaker 1: this could touch the Dodgers.
Speaker 2: Oh my god, I'd almost forgotten about the Dodgers at
Speaker 2: this point.
Speaker 1: And he still owns a team. Mark Walter still has
Speaker 1: the controlling share in the Dodgers.
Speaker 4: Also, Dodgers much higher at the current moment in the
Speaker 4: pantheon of American sports than the Lakers.
Speaker 1: Currently winning a lot more than the Lakers are.
Speaker 4: Can I tell you a very brief, sad story about
Speaker 4: the Dodgers. Yeah, sure, My son is a Mets fan.
Speaker 1: The Mets are going to come up later in the story.
Speaker 4: He told me that his fondest hope is for the
Speaker 4: Mets to be good enough during this stretch and his
Speaker 4: team that when they make the documentary about how good
Speaker 4: the Dodgers are, the Mets are the main other team.
Speaker 4: That's like his highest hope for the Mets and very
Speaker 4: unlikely one.
Speaker 1: Okay, well, let me tell you how that might happen
Speaker 1: in a little bit. So we're recording this on Tuesday morning,
Speaker 1: the news is coming fast and furious. The Financial Times
Speaker 1: reported on Monday that Mark Walter and his often partner
Speaker 1: Todd Bowley are shopping their shares in Chelsea, the English
Speaker 1: Premier League soccer team. This is one of their other
Speaker 1: premium sports assets. So this is all based on what
Speaker 1: we know right now. Stuff is happening really fast. You
Speaker 1: may have heard that the Dodgers are quote ruining baseball.
Speaker 1: I have heard that they have the highest payroll they
Speaker 1: were able to. I mean, in this trade deadline, they
Speaker 1: got Trek Skouble, the best picture on the mark market,
Speaker 1: they got the best hitter on the market, the best
Speaker 1: closer on the market, and last offseason Kyle Tucker and
Speaker 1: Edwin Diaz. They both stink now. But the point is
Speaker 1: that they can. They can sustain signing those guys in
Speaker 1: them stinking and still be like a great team because
Speaker 1: they spend way more money than everyone else the team
Speaker 1: as a team, they make tons of money. There's so
Speaker 1: much because of Otani, there's so much money coming from
Speaker 1: Japan and Hello Kitty and Hello Kitty. Of course they
Speaker 1: could even sign Hello Kitty. This was like, you know,
Speaker 1: I think people would love wine. I could bat ninth.
Speaker 1: They'd probably she could bat ninth, they'd probably be fine.
Speaker 1: And hello, Kitty, I learned, is actually a human canonically
Speaker 1: a human? Is that true? That's what I learned.
Speaker 3: So so could play baseball.
Speaker 1: Could play baseball? Low, there's nothing in the role book
Speaker 1: that says, hello, Kitty can't play baseball. Their payroll is
Speaker 1: the highest ever, but that's driven by these extremely high
Speaker 1: revenues that they have, which is in turn driven by
Speaker 1: an amazing Winfall TV deal that they got when Walter
Speaker 1: was buying the team as an indirect result of previous
Speaker 1: owner Frank McCourt's divorce proceedings and ultimately bankruptcy proceedings. That
Speaker 1: deal is it's its own episode, but suffice it to say,
Speaker 1: like this, this TV deal is one of the big
Speaker 1: separators of the Dodgers from the rest of the league.
Speaker 1: This is a detail from these insurance companies and their
Speaker 1: financial statements that I'm personally very curious about those debts
Speaker 1: from the insurance companies, those loans that were incorrectly labeled.
Speaker 1: They said we're investing in unaffiliated companies, they were actually affiliated.
Speaker 1: What are those companies? Right? It hasn't been reported yet
Speaker 1: anywhere definitively like the investigation hasn't said, like, we're curious
Speaker 1: about the money going to these parts of Vampire Walter's
Speaker 1: huge empire. Exactly. Based on the company's own filings, hundreds
Speaker 1: of millions of dollars of those incorrectly labeled affiliated investments
Speaker 1: went to American Media Productions, which is the parent company
Speaker 1: of Sports netw LA, the Dodgers' regional TV channel, so
Speaker 1: sports and at LA is owned by Mark Walter, owned
Speaker 1: by the Dodgers ownership Group. It was basically created to
Speaker 1: be a vessel for this TV deal and a substacker
Speaker 1: named Nick Neemith, whose substack is called mispriced Assets. He
Speaker 1: found that there's five hundred and eighty seven million dollars
Speaker 1: in debt holdings from Walter related insurance companies that were
Speaker 1: marked unaffiliated that were that this money was going to
Speaker 1: American Media Productions, and the Wall Street Journal has noted
Speaker 1: these holdings as well. So when you hear Walter was
Speaker 1: using this insurance company money to invest in his own
Speaker 1: companies and not reporting it correctly, a big one of
Speaker 1: those companies was the Dodgers TV Network. It gets weirder still.
Speaker 1: You talked about rating agencies. Thank you for introducing Fitch earlier.
Speaker 1: I was thought I was going to introduce this from scratch.
Speaker 3: Surely what this?
Speaker 4: You know the way to the top of the new
Speaker 4: two hundred is to get way on boundaries.
Speaker 1: So the Wall Street Journal found that Mark Walter and
Speaker 1: his companies disproportionately use this one ratings agency to rate
Speaker 1: their debt you've heard of like Fitch and Moodies and
Speaker 1: Standard and Poors. Wall Street Journal found that they use
Speaker 1: a company called Egan Jones a lot, and they used
Speaker 1: it to rate their American Media Production's debt. The sports
Speaker 1: net company Debt and Egan Jones gave this debt gave
Speaker 1: American Media Productions a BBB, which is just barely investment grade.
Speaker 1: It's one notch above junk. Two former employees are suing
Speaker 1: Egan Jones at the at the same time, saying that
Speaker 1: the company pressured staff to inflate ratings to gain business.
Speaker 3: In this specific case or across the board.
Speaker 1: Across the board, and a Wall Street Journal analysis showed
Speaker 1: that across fifty two cases they looked at where a
Speaker 1: debt had been rated by two different agencies, Egan Jones
Speaker 1: ratings were on average a point higher than pers and
Speaker 1: in dozens of cases they were three points higher. So
Speaker 1: and the Wall Street Journal in this article really focuses
Speaker 1: on the American media debt and the way that I
Speaker 1: feel like papers do when they want to show that
Speaker 1: they've got something, even if they can't tell the whole story.
Speaker 1: So hundreds of millions of dollars of loans to the Dodgers'
Speaker 1: TV channel sitting on their insurance company's books, mislabeled as
Speaker 1: an unrelated transaction even though the same guy owns all
Speaker 1: of it. Also hired a rating agency that allegedly had
Speaker 1: a reputation for inflation that rated these debts as just
Speaker 1: above junk. If that rating was inflated, it would take
Speaker 1: it from junk to barely investment great. So Walters Group
Speaker 1: is now looking to unwind these affiliated investments. What does
Speaker 1: unwinding five hundred and thirty seven million dollars in debt
Speaker 1: from Sportsnet look like for the channel and for the Dodgers, Like,
Speaker 1: I don't know, I don't know if this is one
Speaker 1: of the investments that they're that they're attempting to unwind.
Speaker 1: But if they hold on to this Sportsnet debt and
Speaker 1: it's found to be mispriced, that's more money that he
Speaker 1: needs to claw back to keep his insurance companies out
Speaker 1: of receivership, keep this from like spreading across the whole
Speaker 1: googen High Empire. And his search for money is not
Speaker 1: going great by by all accounts. He went to Steve Cohen,
Speaker 1: the billionaire hedge fund guy who owns the Mets, and
Speaker 1: he asked if Steve con would help him raise capital
Speaker 1: to pay down these loans, and Steve Cohen basically told him,
Speaker 1: don't let the door hit you. Where the good lord
Speaker 1: to plit ye? And according to the Financial Times, they
Speaker 1: say a person familiar with the matter told the Financial
Speaker 1: Times that saying no was a quick and easy decision
Speaker 1: to pass on helping.
Speaker 2: Like we don't have anything to do with that guy.
Speaker 1: This is a you know, a rival, this is a
Speaker 1: billionaire baseball rivalry. Yeah, I mean maybe the conversation was
Speaker 1: like give me the Dodgers, said I'll make them, you know.
Speaker 3: I can make them sad with me.
Speaker 1: So on August twelfth, the La Times reports that sources
Speaker 1: say Mark Walter has no intention of selling the Dodgers.
Speaker 1: That was August twelfth, watch them have sold by the
Speaker 1: type this episode codes out, I want to invite anyone
Speaker 1: who is curious to look into this relationship, especially someone
Speaker 1: that like really knows about finance. I'm a liberal arts major.
Speaker 1: This relationship between Mark Walter's insurance companies and this American
Speaker 1: media production's debt. It's all in their their their their
Speaker 1: public statements, and share your findings with me in the
Speaker 1: hashtag sports channel and the ELI material forum. After you
Speaker 1: become a member of ELI material at elimateial dot com
Speaker 1: slash upgrade, I will be talking about it in there
Speaker 1: and right here. If you have any extra questions.
Speaker 3: What does this.
Speaker 2: Mean for Lakers fans and Dodgers fans?
Speaker 1: I'll tell you for the when it it comes. Well,
Speaker 1: the Lakers are getting new owners. We're figuring out exactly
Speaker 1: who they are because Bob Igri and Josh Kushner are
Speaker 1: buying Mark Walters and Todd Bowleies and like that group's
Speaker 1: share of the team. But now the Bus family, a
Speaker 1: majority of them has said that they want to sell
Speaker 1: their share as well. Genie Bus, however, the sister who
Speaker 1: was kind of a point is like governor of the team,
Speaker 1: said I don't want to sell. We're not selling. I'm
Speaker 1: governor for life legally.
Speaker 2: And so that family drama is also another episode unto itself.
Speaker 1: Jerry Buss. Doctor Jerry Buss said he was worried when
Speaker 1: he was alive that when he passed, ownership of the
Speaker 1: team would divide his children, and that happened now did
Speaker 1: come to pass.
Speaker 4: As documented in the documentary series that Ka Running Points.
Speaker 3: That's right, yeah, I mean not really. It's a delightful sitcom.
Speaker 3: Kate Hudson plays Jennie Bus or Genie Bus type.
Speaker 2: Yeah, but I haven't watched the show, so.
Speaker 1: What could happen to the Dodgers, You know, if the
Speaker 1: team isn't sold the Dodgers. Dodgers fans have recent memory
Speaker 1: of what it's like having an owner that is embroiled
Speaker 1: in really serious like financial issues. Frank mccorr got a
Speaker 1: divorce that if there is a divorce Hall of Fame,
Speaker 1: it has a little special exhibit and that did end
Speaker 1: up manifesting in less money going towards the team. But
Speaker 1: if they decided to take more revenue out, that's money
Speaker 1: that could potentially potentially less money could be spent on
Speaker 1: the team. It could also end up with new ownership
Speaker 1: that has a different approach to managing the franchise, like
Speaker 1: it can ownership matters a great deal.
Speaker 2: But do you think like new ownership could mean that
Speaker 2: this like glorious age of Dodger like doomin.
Speaker 1: That it's that combined with a lot of different other
Speaker 1: factors that are happening at the same time. People are
Speaker 1: talking about a strike next year in MLB, like in
Speaker 1: part because of the Dodgers runing baseball, and part of
Speaker 1: what's being discussed in MLB. In MLB is a salary cap,
Speaker 1: which they don't have now. That like basically says you're
Speaker 1: only allowed to spend this much money on payroll in
Speaker 1: having you know, an owner like Mark Walter, who was
Speaker 1: a pretty powerful voice when it came to these negotiations,
Speaker 1: be preoccupied with some other it it Uh, it does
Speaker 1: change some dynamics.
Speaker 4: Big spending representation at the table.
Speaker 3: He's tied up doing other things.
Speaker 1: Yeah, and it does. And also if he is criminally
Speaker 1: charged if that, if that happens, there are provisions that
Speaker 1: can force a sale of the like like morality clauses.
Speaker 1: Basically the league ownership is allowed to come in and say, like, hey,
Speaker 1: you have to offload this team.
Speaker 4: What is Walter said publicly about the investigation, Does he
Speaker 4: have any comment yet.
Speaker 1: He I mean, this is like before and after the investigation,
Speaker 1: he was not a talking guy. Yeah. Really, And you know.
Speaker 4: This, there's no lawyers being like mister Walter blah blah blah.
Speaker 1: Oh yeah, they say, oh, they say all they say
Speaker 1: everything was Everything that was mislabeled was an accident. They're
Speaker 1: working with regulators to get it straightened out. He has
Speaker 1: no intention of selling the Dodgers. So it's hard to
Speaker 1: predict based on statements exactly what's going to happen. There's
Speaker 1: also more and more reporting now. The Wall Street Journal
Speaker 1: covered it. Mark Walter had had a stroke a few
Speaker 1: years ago and it has affected his speech, according to
Speaker 1: people inside the organization. There are also people inside the
Speaker 1: organization that are talking about, like questioning his judgment a
Speaker 1: little more. Per this Wall Street Journal reporting from this week.
Speaker 1: So it's a it's a rich thick soup. Do they
Speaker 1: sell soup at Dodger stadiums? A lot of stuff a
Speaker 1: Dodgers they do. I'm sure there's some kind of like
Speaker 1: famous Dodger stadium soup that I could have given it
Speaker 1: used for analogy. Hot talk doesn't really work.
Speaker 2: Well.
Speaker 4: Heyes, thank you so much, Thank.
Speaker 1: You for listening for us The Frothy Michelada. Thank you,
Speaker 1: perfect of course, Bell.
Speaker 4: Wow, Okay, super interesting. Thank you Hayes, thank.
Speaker 1: You, that's La World. Thank you so much for listening.
Speaker 1: If you're able to give it a subscribe, give it
Speaker 1: a rating, give it a review. Very gratitude, very power.
Speaker 1: As well, throw a little hand implicantside joking there so
Speaker 1: they know who sent you. Thank you so much again,
Speaker 1: really appreciate you. I will see you on some podcast
Speaker 1: or another very soon