Allianz fraud architect made $60 million by lying to investors, US claims

0

FRANKFURT, May 17 (Reuters) – The star money manager at the center of a fraud at the U.S. fund unit of Allianz SE (ALVG.DE) has relied on the German insurer’s good reputation to lure investors and thrived on a lack of oversight as he pocketed $60 million in salary, US authorities said.

Grégoire “Greg” Tournant, a French and U.S. citizen, was charged on Tuesday with securities fraud, investment adviser fraud, wire fraud and obstruction of justice in connection with a scheme that ran from 2014 to 2020. learn more

It was a major development in a two-year saga that haunted and embarrassed Allianz, one of the world’s largest financial firms, and began after the collapse of $11 billion in funds managed by Tournant. as markets were plagued by the coronavirus outbreak in early 2020. .

Join now for FREE unlimited access to Reuters.com

Register

US prosecutors said Tuesday that Tournant falsified documents, fabricated risk reports, altered spreadsheets and lied about investment strategy.

Tournant, 55, was the “main architect” of “a blatant and long-running fraud”, US Attorney Damian Williams said.

Lawyers for Tournant said the charges were baseless and he would defend himself. Two other fund managers pleaded guilty and cooperated.

For Tournant and his employer, the start of 2020 marked a rapid turn of fortune.

Tournant had just completed a year in which it earned $13 million, and marketing materials for its funds stated in February 2020 that “today we are as prepared as ever for severe market dislocation.” .

It wasn’t until weeks later, in March, that Tournant’s funds collapsed, triggering investor lawsuits and investigations by the U.S. Securities and Exchange Commission.

The investigation culminated on Tuesday with Allianz agreeing to pay more than $6 billion and its US asset management unit pleading guilty to criminal securities fraud. Read more

“THE COP WAS ASLEEP”

Tournant, with Allianz Global Investors since 2002, founded the so-called Structured Alpha funds in 2005. They have been marketed in particular to typically conservative US pension funds, from those for laborers in Alaska to teachers in Arkansas and workers subway in New York.

The funds used complex options strategies to generate returns.

Tournant, in a May 2016 video reviewed by Reuters, speaks with a slight French accent to say that the best environment for funds is a bear market with high levels of volatility.

“Our strategies aren’t race cars looking to accelerate their way to high returns. They’re four-wheel-drive vehicles designed to tackle rough terrain,” he said in a separate marketing document.

Turning “deceived the funds and their investors by minimizing risk,” the indictment reads.

In one example, Tournant and another fund manager took daily risk reports provided by a sister company and edited 75 of them before passing them on to investors. The effect was to reduce projected losses in stress scenarios.

Tournant touted Allianz’s oversight to investors, telling clients in 2014 that Allianz had acted as “master cop” with “one of the largest and most conservative insurance companies in the world overseeing every position I take”.

But prosecutors wrote that no one at Allianz verified Tournant’s work.

“The cop was sleeping,” prosecutor Williams said.

Michael Peters, an expert at German consumer advocacy group Finanzwende, said such activity could be expected from an aggressive hedge fund, but not from an Allianz subsidiary.

“The trust has been ruined,” he said, adding, “Allianz really needs to look seriously at this.”

Prosecutors said they found no evidence that anyone outside of Tournant’s group knew about the misconduct.

Tournant’s attorneys, Seth Levine and Daniel Alonso, said the investors’ losses were “regrettable” but not the result of a crime.

“Greg Tournant was unfairly targeted [in a] the government’s unwarranted and reckless attempt to criminalize the impact of the unprecedented COVID-induced market dislocation,” Levine and Alonso said in a joint statement.

A December regulatory filing shows Tournant was terminated “for violating company policies designed to ensure compliance with industry regulations and standards.”

On Tuesday, Tournant made a brief appearance in federal court in Denver and was released after agreeing to post $20 million bond. His arraignment was scheduled for June 2 in New York.

Join now for FREE unlimited access to Reuters.com

Register

Reporting by Tom Sims, Alexander Huebner and John O’Donnell in Frankfurt Additional reporting by Jonathan Stempel and Luc Cohen in New York Editing by Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

Share.

Comments are closed.