Guggenheim Partners LLC is facing a lawsuit for allegedly deceiving annuity investors of insurance affiliates and siphoning cash out of Security Benefit Life Insurance Co. to purchase the Los Angeles Dodgers baseball team.
Security Benefit Life, Security Benefit Corp. and Guggenheim Partners allegedly orchestrated a sales scheme that relied on misrepresentations and omissions of material facts to sell annuities that were "fundamentally inferior" to comparable products. Security Benefit Life, which became a Guggenheim Partners company in 2010, was also allegedly made to look financially stronger than it really was.
Guggenheim Partners and fellow defendant Royal Bank of Scotland Group PLC, which administered the annuities, also allegedly charged "exorbitant" management fees and investment fees from Security Benefit Life without providing corresponding value to the affiliate and its policyholders.
The complaint claims that Guggenheim Partners siphoned cash from Security Benefit Life by using "improper" loans and promissory notes to finance the $2.15 billion purchase of the Major League Baseball team. Guggenheim Partners allegedly used policyholder and annuity holder money of its insurance affiliates to finance $1.2 billion of the purchase price.
The lawsuit, which alleges breach of contract, racketeering and unjust enrichment, seeks class action status and treble damages. Security Benefit Life, Security Benefit and Guggenheim Partners Investment Management LLC are also defendants in the lawsuit, which was filed in the United States District Court for the District of Kansas.
"The allegations in this lawsuit are factually incorrect and based on legal theories that are not viable," Security Benefit said in a statement to S&P Global Market Intelligence. "Security Benefit will vigorously defend itself against these baseless allegations to the fullest extent possible under United States law."
Guggenheim Partners did not immediately respond to a request for comment.