Architect of Allianz fraud made $60 million as he lied to investors, U.S. says
By Tom Sims, Alexander Hübner and John O’Donnell
FRANKFURT (Reuters) -The star portfolio supervisor on the centre 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 mentioned.
Gregoire “Greg” Tournant, a citizen of France and the USA, 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 serious growth in a two-year saga that has haunted and embarrassed Allianz, one of many globe’s greatest monetary companies, 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 mentioned Tournant faked paperwork, fabricated danger reviews, altered spreadsheets, and lied concerning the funding technique.
Tournant, 55, was the “major architect” of “an egregious, long-running in depth fraud,” U.S. Lawyer Damian Williams mentioned.
Tournant’s attorneys mentioned the fees have been with out benefit and that he would defend himself. Two different fund managers pleaded responsible and have been cooperating.
For Tournant and his employer, early 2020 marked a swift flip of fortune.
Tournant had simply closed out a 12 months by which he earned $13 million, and his funds’ advertising and marketing materials mentioned in February 2020 that “at present 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 Change 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 prison securities fraud.
‘THE COP WAS ASLEEP’
Tournant, with Allianz International Traders since 2002, based the so-called Structured Alpha funds in 2005. They have been marketed particularly to usually conservative U.S. pension funds, from these for labourers in Alaska to lecturers in Arkansas and subway employees in New York.
The funds used advanced choices methods to generate returns.
Tournant, in a Might 2016 video reviewed by Reuters, speaks in a slight French accent to say the funds’ greatest atmosphere is a bear market with excessive ranges of volatility.
“Our methods aren’t race vehicles seeking to velocity their technique to excessive returns. They’re four-wheel drive autos designed to sort out tough terrain,” he mentioned 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 each day danger reviews offered by a sister firm and altered 75 of them earlier than they went to traders. The impact was to cut back projected losses in stress situations.
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 the earth monitoring each place that I take.”
However prosecutors wrote that nobody at Allianz verifying Tournant’s work.
“The cop was asleep,” prosecutor Williams mentioned.
Michael Peters, an professional with German client advocacy group Finanzwende, mentioned such exercise might be anticipated from an aggressive hedge fund however not from an Allianz subsidiary.
“Belief was gambled away,” he mentioned, including, “Allianz actually must take a tough have a look at the matter.”
Prosecutors mentioned they discovered no proof that anybody outdoors Tournant’s group knew of the misconduct.
Tournant’s attorneys Seth Levine and Daniel Alonso mentioned the investor losses have 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 impression of the unprecedented, COVID-induced market dislocation,” Levine and Alonso mentioned in a joint assertion.
A December regulatory submitting reveals that Tournant was let go “for violation of agency insurance policies designed to make sure compliance with trade rules and requirements.”
On Tuesday, Tournant made a short look in Denver federal court docket and was launched after agreeing to put up 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 YorkEditing by Matthew Lewis)
