KPMG, a Big Four auditor, issued a warning to Guggenheim Partners last year concerning deficiencies in its internal controls. These concerns were raised months before a US federal probe into the insurance holdings of Mark Walter, Guggenheim's chief executive, became public. Specifically, KPMG identified shortcomings related to how a subsidiary of Guggenheim's $367 billion asset manager recognized hundreds of millions in revenue.
The auditor's assessment followed a whistleblower complaint that raised concerns about the unit's accounting practices. This scrutiny adds to the pressure on Walter's businesses, which intensified after insurers he controlled disclosed in June that they had loaned billions to other parts of his empire while misclassifying these loans in regulatory filings. US prosecutors are currently investigating these insurers, which are owned by Walter's holding company, TWG Global.
Separately, Guggenheim Investments is facing probes from both the Department of Justice and the SEC. Despite KPMG privately warning senior executives about a "material weakness" related to $275 million in revenue booked by its subsidiary, Guggenheim Private Investments, KPMG still issued unqualified opinions on Guggenheim's financial statements. This is permissible under auditing standards for private companies, which do not require public disclosure of such deficiencies.
The whistleblower alleged "vagueness about the services to be rendered" for this nine-figure fee, which is unusually large compared to typical 0.5% management fees seen at other firms. Guggenheim President Dina Di Lorenzo reportedly claimed to KPMG that she personally performed the advisory services, a statement Guggenheim has described as "misleading and lacks context." The asset manager maintains it acted "appropriately and professionally."
