A monitor displays Allianz Global Investors GmbH signage on the floor of the New York Stock Exchange (NYSE) in New York.
Michael Nagle | Bloomberg | Getty Images
Bus drivers, subway conductors and religious and charitable organizations nationwide lost over $5 billion when a Covid-induced stock market collapse crushed private investment funds linked to a financial industry giant, exposing a massive fraud, authorities said Tuesday.
U.S. Attorney Damian Williams said his office took the rare step of bringing criminal charges against Allianz Global Investors US, a New York City-based investment adviser, in part because the company failed to reveal an “egregious, long-running and expensive fraud” before the Securities and Exchange Commission discovered it.
“Make sure you call us before we call you,” Williams told a news conference, vowing to remain “relentless in rooting out corruption in our financial markets.”
As part of a deal with prosecutors, Allianz Global Investors US LLC agreed to plead guilty Tuesday to its role in a fraud stretching from 2014 to 2020 and pay $3.2 billion in restitution, a $2.3 billion fine and to forfeit $463 million. Prosecutors called it one of the most significant corporate resolutions in history.
AGI US is an indirect, wholly owned subsidiary of the Munich, Germany-based Allianz SE, one of the world’s largest financial services and insurance companies.
The prosecutor also announced conspiracy, securities fraud and obstruction of justice charges against Gregoire Tournant, 55, of Basalt, Colorado, the former chief investment officer for a series of funds at AGI US that was once worth $11 billion. Two other men blamed in the fraud have pleaded guilty and are cooperating, Williams said.
Williams said Tournant and his co-conspirators lied to investors and secretly exposed them to substantial risk to illegally profit.
“Pension funds for so many retirees, religious organizations, and essential workers — from laborers in Alaska, to teachers in Arkansas, to bus drivers and subway conductors here in New York City — invested with AGI because they were promised a relatively safe investment with strict risk controls,” he said.
But he said that despite Tournant’s claims that the corporate “master cop” was looking over his shoulder, AGI US was “asleep on the beat” and when the COVID-induced market crash arrived, “these investors got soaked and lost billions.”
Still, SEC Director of Enforcement Gurbir S. Grewal told the news conference that victims “have been, or soon will be, made whole” from a fraud that cost them $5 billion.
He said the SEC penalties against AGI US, which included $315.2 million in disgorgement, $34 million in prejudgment interest, and a $675 million civil penalty, were the largest penalties in an SEC case brought by the agency in two decades.
In a civil complaint …….