Allianz subsidiary, two former employees plead guilty for allegedly defrauding investors
A subsidiary of the international financial services provider Allianz and two of its three former employees have pleaded guilty to allegedly defrauding investors regarding the safety of “Structured Alpha Funds,” officials announced Tuesday.
U.S. Attorney Damian Williams announced on Tuesday that Allianz Global Investors (AllianzGI) and two former employees — former portfolio managers Trevor Taylor and Stephen Bond-Nelson — pleaded guilty to allegedly misleading investors about the safety of AllianzGI’s Structured Alpha Funds investment products.
Gregoire Tournant, the former chief investment officer for the Structured Alpha Funds, also faces charges including conspiracy, securities fraud, investment adviser fraud and obstruction of justice.
Williams said institutional investors including pension programs were among those who purchased the Structured Alpha Funds. Tournant allegedly deceived investors into thinking that the funds were protected against major stock market drops, claiming he told investors he would buy protective hedges.
Williams claimed that Tournant bought less expensive hedges to keep the funds profitable despite leading to more financial risk as the initial hedges became more expensive.
Authorities also believe that fake documents had been given to investors that did not indicate that they were taking on more risk through these funds, saying it took until the stock markets crashed around the beginning of the COVID-19 pandemic before billions of dollars held by more than 100,000 investors was lost.
Williams said AllianzGI had agreed to pay more than $3 billion in restitution, a criminal fine of roughly $2.3 billion and a forfeiture to the government of about $463 million.
“The Statement of Facts accompanying the DOJ resolution states that the criminal misconduct regarding the Structured Alpha funds was limited to a handful of individuals in the Structured Products Group of AGI U.S. who are no longer employed by the company, and that the DOJ’s investigation did not otherwise find any knowledge of, or participation in, the misconduct at Allianz SE or any other entity of the Allianz Group,” Allianz said in a press release on Tuesday.
“The guilty plea will result in the disqualification of AGI U.S. from advising U.S. registered mutual funds and certain type of pension funds after expiry of a temporary relief period. Allianz expects the SEC to issue waivers later today that will ensure that AGI U.S.’s resolution with the DOJ does not impact PIMCO and Allianz Life’s business activities,” it added.
AllianzGI separately announced on Tuesday that it would receive a 24 percent equity stake in Voya Investment Management (Voya IM) in exchange for certain investment teams and assets related to their U.S. business being transferred to Voya IM.
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