r/baseball • u/f0urxio • Sep 04 '26

Players Only [SBNation] Pablo Torre’s Dodgers bombshell reveals real threat to every American: teased deepdive into financials of Walter & Dodgers, an alleged shell game of investments & insider deals which are now under scrutiny of federal government, which could wind up with Walter and Magic Johnson in prison

https://www.sbnation.com/mlb/1127272/pablo-torre-dodgers-bombshell-reveals-mark-walter-guggenheim
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u/unpuzzling Detroit Tigers Sep 04 '26 edited Sep 05 '26

FYI the harm to American people is the life insurance that normal people are purchasing to help their family. This life insurance premium could easily be turned worthless because of Walters’ company drawing on them to fund his other enterprises. This is not so dissimilar to what SBF did but without the crypto of it all. This is not how these companies are meant to function and use of funds needs to be reported or regulators will begin to notice some funny business in finances because of how money moves in the financial services business. 

It’s unlikely the billionaires will get in trouble but average every day Americans may be left without something that’s meant to support their family if anything happens to them. A lot of people get life insurance policies with their jobs, etc. 

It is worth watching the Pablo video on this rather than taking the version off SBNation since it breaks down why this is so bad:  https://youtu.be/YBvdMVY7LW4?is=L9pkgo-5mtczu79R

The Ballmer deals were also bad for similar obfuscation of funds usage and it’s why some of their partners are being looked into by the SEC. 

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u/AdamantArmadillo Los Angeles Dodgers Sep 04 '26

I'm super dense with financial stuff, so forgive me being slow on the uptake. I'm trying to understand this story, and I think this comment is the closest I've come to understanding it so far. Tell me if I'm off anywhere:

Basically, he is the steward of normal people's money through this life insurance business. Different than if he had profited off a regular transaction like a restaurant meal or movie tickets because that money is expected to pay out at some point. He goes to buy the Dodgers (and a bunch of other sports teams) saying "I've got a ton of money to buy this team" but he doesn't disclose that a good chunk of the money is from life insurance premiums, which is essentially borrowed from ordinary people. Not disclosing that is illegal.

This is bad because if the Dodgers, MLB or any of these other sports leagues he's got teams in suddenly tank in value, he's lost a bunch of money that wasn't really his to go buying things with. That could leave the ordinary people on the hook -- not getting life insurance payouts even though they've been paying their premiums. Basically a huge breach of contract, or essentially theft.

Do I have that right?

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u/BaseballsNotDead Seattle Pilots Sep 04 '26 edited Sep 04 '26

The key is insurance companies normally invest the premiums, but since actually being able to pay out claims is a cornerstone of the insurance industry and the well-being of policyholders, the government regulates how this money can be invested. The majority of investments will be bonds with specific payments cycles so an insurance company has enough cash on hand at any time to statistically be able to pay expected claims. They can invest some of that money (called float) into riskier investments, but the amount is very limited and regulated, including required diversification so that the insurance money can't all be invested in the same risky investment.

Investing some of that money into your own businesses can be OK (it's partly how Warren Buffett made his fortune), but it must be disclosed because investing too much into your own businesses is a risk/diversification nightmare that increases the probability that an insurance company can't pay out claims should that company go south.

The disclosure problem isn't that he didn't disclose to the Dodgers and other teams that it was insurance money... it's that he didn't disclose to the government that he was investing insurance money into his own businesses and blew past the amounts that the government allows. Now that he's under investigation, he has to quickly rebalance those investments to meet regulations, and that requires liquidity (why he sold the Lakers).

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u/Double-Mine981 Houston Astros Sep 05 '26

Margin call 2 please