German insurance company Allianz pays more than $ 6 billion and its investment subsidiary pleads guilty to securities fraud for the collapse of a group of hedge funds that have wiped out the investment of public pensions, religious groups, foundations and other investors. I agreed.
Allianz’s investment adviser, which managed the hedge fund, couldn’t stop the fraudulent plans revealed after the fund collapsed early in the pandemic, a court filing filed by a federal prosecutor on Tuesday. according to.
The prosecution said three former Allianz portfolio managers, including the fund’s former chief investment officer, misleaded fund investors by concealing the risks they faced. Former executive Gregoire Tournant was also accused of trying to hide the plan. He was charged with a series of criminal charges, including conspiracy, securities fraud, and obstruction of justice.
Two other portfolio managers, Stephen Bond Nelson and Trevor Taylor, agreed to plead guilty in February on charges of including securities fraud, according to a court document opened on Tuesday.
Allianz said it is no longer allowed to advise certain types of funds in the United States as a result of its guilty plea, while at the same time reaching a preliminary agreement to transfer control of approximately $ 120 billion in assets to a new partner. Was announced. .. Allianz said it is in talks with New York-based company Voya Financial and will reach an agreement in the coming weeks.
The study focused on the company’s Structured Alpha Funds, which lost about $ 7 billion at the start of the Covid-19 pandemic due to a serious loss in stocks.
But the seeds of the destruction were planted many years ago, officials said. Investigators said Allianz authorities misunderstood investors about the fund’s risk levels and changed the document to make the fund look safer than before.
Federal prosecutors and the Securities and Exchange Commission have begun investigating after the collapse of funds, telling investors months that Allianz had secured billions of dollars to solve the problem. ..
Regulators said Allianz agreed to pay investors more than $ 5 billion and the government more than $ 1 billion in damages to resolve the SEC’s investigation.
The indictment against Mr. Tonant said he tried to thwart the SEC’s investigation and repeatedly instructed one of the former portfolio managers to lie to the investigator.
Tonant, 55, voluntarily surrendered to Denver officials on Tuesday morning, according to a spokesman for Damian Williams of the United States Attorney for the Southern District of New York. Tournant’s lawyer, Dan Alonso, wasn’t immediately asked for comment.
Allianz said in a statement that the illegal activity was “limited to a small number of individuals” who were no longer employed by the company.
A representative of the company was expected to appear in federal court and enter a guilty plea against the investment sector. Portfolio managers Bond Nelson and Taylor, who agreed to plead guilty to their role in the scheme, also agreed to settle with the SEC.
“Allianz Global Investors have admitted that they have been able to trick investors over the years, conceal complex strategic losses and downside risks, and fail to implement key risk management,” said SEC Chair Gary Gensler. I am. “Victims of this illegal activity include teachers, clergy, bus drivers and engineers, and their pensions are invested in institutional funds to support their retirement.”
According to investigators, misrepresentations to investors date back to 2016. This allowed the company to generate $ 400 million in net income by managing a former portfolio manager fund and large bonuses.
A statement of facts that is part of a plea statement by an Allianz investment company states that the company “significantly underestimates the risks taken by the fund and overestimates the level of independent risk to current and future investors. I made a false and misleading statement. ” Fund monitoring. “
The pitchbook, created for investors, misrepresented the steps the fund took to hedge investments from losses, officials said. Portfolio managers have also made the returns generated by the fund “smooth”, making performance more predictable.