The settlement of large-scale investment fraud discovered last year has cost the German insurer Allianz a cost of more than 6 billion dollars (5.7 million euros). The Munich company announced this on Wednesday evening. Allianz pays the US Justice Department a $2 billion fine after pleading guilty, and will pay billions more to victims. It also pays $675 million to the US stock watchdog SEC – one of the largest fines it has handed out in years.
The payments put an end to the so-called ‘Structured Alpha’ scandal. A small, American asset management division of Allianz by that name has been shielding investors for years that are far too low. When the corona pandemic broke out and the stock markets crashed, many customers lost large amounts of money. These included the pension fund of the New York subway company and pension funds for teachers.
In addition to the fines and compensation that Allianz pays, fund manager Gregoire Tournant, who ran Structured Alpha out of Florida, is being charged with fraud. At one point, he and two partners managed assets of more than $11 billion. The three partners made millions of dollars a year; their fund itself yielded a total of hundreds of million euros to Allianz.
Data from the US stock market regulator SEC showed on Wednesday how the French-American Tournant sometimes managed to attract investors. For example, his team tinkered with potential loss scenarios by manually adjusting them. If a scenario resulted in a possible loss of 42 percent, in the presentation to investors that would be 4 percent, according to the Süddeutsche Zeitung†
Munich didn’t ask any questions
When the affair came out in the course of 2020, it raised many questions about the control and corporate culture at Allianz (turnover in 2021: 148 billion euros). At the peak of its existence, Structured Alpha provided more than a quarter of the revenue of all asset managers under Allianz – who together managed $600 billion, a multiple of the $11 billion that Structured Alpha managed. At the head office in Munich, this never led to any question marks. In addition, when the fraud came out, Allianz initially denied any involvement.
However, the group ultimately could not avoid pleading guilty, as it has recently done. In September 2021, board member Jacqueline Hunt left because of the matter, just after the US Department of Justice announced it would start an investigation into the insurer.
Also read:Sophisticated Fraud Affects Hundreds of Wealthy Individuals
The ministry is also banning Allianz from offering investment products for the next ten years. The two colleagues of fund manager Tournant have already pleaded guilty, Tournant himself continues to maintain that he simply ran an investment fund. All three face long prison terms.