The star portfolio supervisor on the heart of a fraud on the U.S. funds unit of Allianz SE relied on the German insurer’s good title to lure traders and thrived from a scarcity of oversight as he pocketed $60 million in pay, U.S. authorities stated.
Gregoire “Greg” Tournant, a citizen of France and the US, was indicted on Tuesday for securities fraud, funding adviser fraud, wire fraud and obstruction of justice in a scheme that ran from 2014 to 2020.
It was a significant growth in a two-year saga that has haunted and embarrassed Allianz, one of many globe’s largest monetary corporations, and commenced after the $11 billion in funds managed by Tournant collapsed as markets roiled with the outbreak of the coronavirus in early 2020.
U.S. prosecutors on Tuesday stated Tournant faked paperwork, fabricated danger experiences, altered spreadsheets, and lied in regards to the funding technique.
Allianz to Pay Over $6B for Structured Alpha Fraud, Former Fund Manager Indicted
Tournant, 55, was the “main architect” of “an egregious, long-running intensive fraud,” U.S. Legal professional Damian Williams stated.
Tournant’s attorneys stated the fees had been with out benefit and that he would defend himself. Two different fund managers pleaded responsible and had been cooperating.
For Tournant and his employer, early 2020 marked a swift flip of fortune.
Tournant had simply closed out a 12 months through which he earned $13 million, and his funds’ advertising and marketing materials stated in February 2020 that “at the moment we’re as ready as ever within the occasion of a extreme market dislocation.”
It was simply weeks later, in March, that Tournant’s funds collapsed, unleashing investor lawsuits and investigations by the U.S. Securities and Alternate Fee.
The probe culminated on Tuesday with Allianz agreeing to pay greater than $6 billion and its U.S. asset administration unit pleading responsible to legal securities fraud.
‘The Cop Was Asleep’
Tournant, with Allianz International Traders since 2002, based the so-called Structured Alpha funds in 2005. They had been marketed specifically to usually conservative U.S. pension funds, from these for laborers in Alaska to academics in Arkansas and subway staff in New York.
The funds used complicated choices methods to generate returns.
Tournant, in a Might 2016 video reviewed by Reuters, speaks in a slight French accent to say the funds’ finest setting is a bear market with excessive ranges of volatility.
“Our methods aren’t race automobiles seeking to pace their method to excessive returns. They’re four-wheel drive automobiles designed to sort out tough terrain,” he stated in separate advertising and marketing materials.
Tournant “deceived the funds and their traders by understating the danger,” the indictment reads.
In a single instance, Tournant and one other fund supervisor took every day danger experiences offered by a sister firm and altered 75 of them earlier than they went to traders. The impact was to scale back projected losses in stress eventualities.
Tournant touted Allianz’s oversight to traders, telling purchasers in 2014 that Allianz acted as a “grasp cop” with “one of many largest and most conservative insurance coverage firms on this planet monitoring each place that I take.”
However prosecutors wrote that nobody at Allianz verifying Tournant’s work.
“The cop was asleep,” prosecutor Williams stated.
Michael Peters, an professional with German shopper advocacy group Finanzwende, stated such exercise could possibly be anticipated from an aggressive hedge fund however not from an Allianz subsidiary.
“Belief was gambled away,” he stated, including, “Allianz actually must take a tough take a look at the matter.”
Prosecutors stated they discovered no proof that anybody exterior Tournant’s group knew of the misconduct.
Tournant’s attorneys Seth Levine and Daniel Alonso stated the investor losses had been “regrettable” however didn’t end result from against the law.
“Greg Tournant has been unfairly focused [in a] meritless and ill-considered try by the federal government to criminalize the affect of the unprecedented, COVID-induced market dislocation,” Levine and Alonso stated in a joint assertion.
A December regulatory submitting exhibits that Tournant was let go “for violation of agency insurance policies designed to make sure compliance with business rules and requirements.”
On Tuesday, Tournant made a short look in Denver federal courtroom and was launched after agreeing to submit a $20 million bond. His arraignment was scheduled for June 2 in New York.
(Reporting by Tom Sims, Alexander Huebner and John O’Donnell in Frankfurt. Extra reporting by Jonathan Stempel and Luc Cohen in New York.)
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