Architect of Allianz fraud made $60 million as he lied to investors, U.S. says By Reuters

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 (ETR:) SE relied on the German insurer’s good identify to lure traders and thrived from an absence 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 improvement in a two-year saga that has haunted and embarrassed Allianz, one of many globe’s largest 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 threat stories, altered spreadsheets, and lied in regards to the funding technique.

Tournant, 55, was the “main architect” of “an egregious, long-running in depth fraud,” U.S. Legal professional Damian Williams mentioned.

Tournant’s attorneys mentioned 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 during which he earned $13 million, and his funds’ advertising and marketing materials mentioned in February 2020 that “right now 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 legal securities fraud.

‘THE COP WAS ASLEEP’

Tournant, with Allianz World Traders since 2002, based the so-called Structured Alpha funds in 2005. They had been marketed specifically to sometimes conservative U.S. pension funds, from these for labourers in Alaska to academics in Arkansas and subway employees 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 surroundings is a bear market with excessive ranges of volatility.

“Our methods are usually not race automobiles seeking to pace their approach 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 chance,” the indictment reads.

In a single instance, Tournant and one other fund supervisor took day by day threat stories 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 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 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 could possibly 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 take a look at the matter.”

Prosecutors mentioned they discovered no proof that anybody exterior Tournant’s group knew of the misconduct.

Tournant’s attorneys Seth Levine and Daniel Alonso mentioned the investor losses had been “regrettable” however didn’t outcome from a criminal offense.

“Greg Tournant has been unfairly focused [in a] meritless and ill-considered try by the federal government to criminalize the influence of the unprecedented, COVID-induced market dislocation,” Levine and Alonso mentioned 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 trade rules and requirements.”

On Tuesday, Tournant made a short look in Denver federal court docket and was launched after agreeing to submit a $20 million bond. His arraignment was scheduled for June 2 in New York.