Unlock the Editor’s Digest for free with Roula Khalaf, Editor of the FT, as she selects her favorite stories in this weekly newsletter. The lead manager in a funds scandal that resulted in a $6bn settlement between Germany’s Allianz and US authorities has pleaded guilty to investment adviser fraud. This scandal at one of its US asset management units shook Allianz, one of the world’s largest insurance groups. Gregoire Tournant, the former lead manager of a set of funds at Allianz Global Investors, pleaded guilty to two counts of investment adviser fraud. These funds were marketed as able to withstand a market crash and amassed $11bn at their peak before experiencing heavy losses in the 2020 pandemic sell-off.
Damian Williams, the US attorney for the Southern District of New York, stated that Tournant and the other managers had misled investors, exposed them to risk, and altered risk reports. Tournant agreed to forfeit about $17mn in paid and deferred compensation and is scheduled to be sentenced in October. Allegations against Tournant and other managers include understating risks and overstating oversight levels. The US Department of Justice investigation revealed significant gaps in the funds’ controls but did not find anyone outside the structured-products group was aware of the misconduct. The settlement included the money paid to the funds’ investors, as regulators investigated and Allianz warned on profits in 2021.
In a civil complaint two years ago, the US Securities and Exchange Commission alleged that Tournant had urged a colleague to give false testimony and met another colleague in an empty construction site to discuss responses to investigators’ queries. As the investigations unfolded, Allianz had to issue a profit warning, and CEO Oliver Bäte expressed deep regret over the impact on investors. A lawyer for Tournant declined to comment, and Allianz also chose not to comment. This guilty plea by Tournant is seen as a significant step in holding wrongdoers accountable and ensuring victims are compensated for their losses.
The scandal at Allianz has sparked concerns over the company’s control functions and governance, prompting the CEO to issue a public apology. This case serves as a cautionary tale for the financial industry about the importance of transparency, accountability, and ethical behavior. The guilty plea by Tournant and the subsequent sentencing in October will be closely monitored by investors, regulators, and industry stakeholders to assess the implications for Allianz and the broader financial services sector. As the investigation into the funds scandal continues, authorities will be looking to ensure that similar misconduct is prevented in the future and that investors’ interests are safeguarded.
The repercussions of the funds scandal have had a significant impact on Allianz’s reputation and financial performance, leading to a reassessment of its risk management practices and internal controls. The financial services industry must learn from this case and strengthen regulatory oversight to prevent similar incidents from occurring in the future. The resolution of this scandal highlights the importance of robust compliance measures and ethical standards in the asset management industry to protect investor trust and maintain market integrity. As the fallout from the scandal unfolds, it will be crucial for Allianz to rebuild credibility and restore investor confidence through transparent communication, proactive risk management, and corporate governance reforms. By addressing the root causes of the scandal and implementing corrective actions, Allianz can demonstrate its commitment to upholding the highest standards of integrity and accountability in its operations.
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