(Bloomberg) -- U.S. regulators are looking at a web of companies linked to an Argentine man who has done almost $1 billion of deals with Guggenheim Partners as part of a wider review of the massive investment firm, according to a person familiar with the matter.
Diego Ball, whose entities have been involved in about $998 million of transactions with Guggenheim, also has ties to Mark Walter, the company’s billionaire co-founder and chief executive officer, through a former Guggenheim affiliate, according to documents obtained by Bloomberg. Ball’s brother Juan worked at Guggenheim for years. None of the parties have been accused of wrongdoing, and it’s unclear exactly why the relationship has attracted the attention of the Securities and Exchange Commission.
Walter, who has led Guggenheim for almost two decades, has been in a dispute with other senior executives this year over management of the firm, and has taken steps to separate his personal holdings -- such as a stake in the Los Angeles Dodgers baseball team -- from the rest of the company, according to people familiar with his plans.
Walter’s relationship with Ball raised questions inside Guggenheim a couple of years ago, when the investment firm approved a $100 million loan the last week of December 2015, to an entity indirectly controlled by the Argentine, according to people familiar with the matter. The loan was ultimately collateralized by interests in 17 limited-liability companies, most of which were created days before the funding was requested. Money for the loan was borrowed from insurance companies owned by Dallas-based Sammons Enterprises, which holds about one-third of Guggenheim’s voting shares, internal documents and regulatory filings show.
Members of Guggenheim’s conflict group and other executives asked for additional details about Ball and his relationship with Walter, and were dissatisfied with the response, said three people familiar with the transactions. They received little documentation proving Ball’s ownership, his background, sources of funding, or underlying collateral for the deal, two of the people said.
Instead, Franklin Monroe Administrative Services, a former Guggenheim affiliate and the agent for Ball’s companies, provided emails and organizational charts in order to show Ball fully owned the LLC receiving the loan.
Guggenheim’s compliance department determined nobody affiliated with Guggenheim had any direct or indirect beneficial interest in the borrower, Kirkdale Funding LLC, and the loan was approved, documents show.
“We looked at all $100 million loans in 2015 and none were handled improperly and all had Know Your Customer due diligence,” Rob Jee, head of compliance at Guggenheim said in an emailed statement, referring to bank and anti-money laundering regulations. These checks were “done more than once on Ball and his related entities and by more than one person.”
Ball, 59, is listed as the president of three companies in Buenos Aires. One of the businesses, ABS Holdings SA, is described in country records as a financial services company.
There are no signs identifying ABS Holdings outside the downtown Buenos Aires office, in the lobby, or on the front door. A man working in the office, who asked not to be identified, said his law firm, Estudio Guido, created the company for Ball. The firm has contact with Ball only about once a year, when they need to submit regulatory documents or renew the building lease, he said.
Ball didn’t respond to messages on LinkedIn, or return requests for comment through a spokesman for his brother, Juan Ball.
Representatives for Franklin Monroe didn’t return telephone or email requests for comment.
The SEC’s role is to ensure that investors are being treated fairly and all relevant conflicts are disclosed to clients. Because Guggenheim is closely held, leaders may have more leeway to limit disclosure, according to Larry Cunningham, a corporate governance expert at George Washington University School of Law.
“Conflicts are common,” Cunningham said. “The more complicated a transaction is, and the more conduits being used, the more suspect.”
One of Walter’s latest outside investments was entertainment mogul David Geffen’s seaside estate, which he bought in a partnership for $85 million. Walter purchased the Malibu, California, property with ABS Capital Company, a firm affiliated with Juan Ball and Pablo Stalman.
“No funds came from Guggenheim, its clients or any insurance company,” said George Haj, a spokesman for ABS Capital. Juan Ball worked at Guggenheim for more than a decade and helped build its private client business in Latin America, Haj said.
ABS Capital and Guggenheim have offices in the same Miami building, located on different floors, property records show.
Walter also maintains ties to Franklin Monroe, the former Guggenheim affiliate that has acted as an agent for many of Diego Ball’s companies. Walter created the firm more than four years ago, moving over more than three dozen Guggenheim employees. A 2013 tax return shows Walter’s family foundation had almost $5 billion in assets and used Franklin Monroe for its bookkeeping.
Franklin Monroe describes itself an administrative services business and still sits in Guggenheim’s Chicago office. Employees list it as a sister to the investment company or an affiliate of Guggenheim on their LinkedIn pages, with one saying that she manages and monitors as much as $10 billion of assets.
"It’s very difficult to run your own investments and, in the same four walls, run third-party cash,” said Todd Cipperman, managing principal of Cipperman Compliance Services. “It gets very dicey.”
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