KPMG, a 'Big Four' auditor, issued a warning to a Guggenheim unit concerning deficiencies in its internal controls, specifically regarding how the private investment division accounted for revenue. This warning occurred prior to federal investigations that uncovered billions of dollars in misclassified related-party investments. The Financial Times reported on this development, which places a major accounting firm within the widening probe.
The federal investigation, spearheaded by the US Attorney's Office for the Southern District of New York and the Securities and Exchange Commission, is examining how insurers controlled by billionaire Mark Walter classified private-credit investments. These investments are tied to Walter's broader business empire, which includes the Los Angeles Dodgers. Two of Walter-controlled insurers, Delaware Life and Clear Spring Life and Annuity, received subpoenas in February, prompting internal reviews that revealed significant reporting errors. Investments previously presented as unaffiliated were, in fact, related-party exposures.
Initially, Delaware Life had reported to regulators that only about 3% of its portfolio was invested in Walter-linked companies. However, after restatement, related-party investments surged to at least $17 billion, representing approximately 39% of total invested assets. By June 30, 2026, the restated figure for related-party investments reached $16.82 billion, with an additional approximately $821 million from funding-agreement and trust-note structures whose repayment depended predominantly on affiliates. The FBI has executed at least one search warrant and seized a mobile phone, indicating a criminal inquiry.
Investigators are focusing on four intermediary firms: ABS Capital, Amistad Financial, Bradford Allen, and Hudson Trading. These firms came under scrutiny after payments under advisory contracts linked them from the insurers to entities connected with loans into Walter-related businesses. Executives Dan Towriss and Andrew Kenney may also become central to the developing story. Despite the ongoing investigations and KPMG's prior warning, a Guggenheim executive stated on August 24, 2026, that the accounting at the unit under scrutiny was appropriate.
This situation highlights the global relevance of private credit's transparency. Life insurers are major buyers of private credit, seeking higher yields. The Walter probe tests the effectiveness of disclosure regimes in tracking related-party risks through intermediaries and special-purpose vehicles. Regulators worldwide are closely observing this case, as it exposes the potential for classification errors to inflate disclosures and conceal true related-party exposures, impacting investors from various global financial centers.
