Allianz's settlements with the U.S. Department of Justice and U.S. Securities and Exchange Commission are among the largest in corporate history, and dwarf earlier settlements obtained under President Joe Biden's administration. The settlement calls for Allianz to pay a USD 2.33 billion criminal fine, make USD 3.24 billion of restitution, and forfeit USD 463 million, court papers show.
Allianz also accepted a USD 675 million civil fine from by the SEC, one of that regulator's largest penalties since Enron Corp and WorldCom Inc imploded two decades ago.
Gregoire Tournant, the former chief investment officer who created and oversaw the now-defunct Structured Alpha funds, was also indicted for fraud, conspiracy, and obstruction, while two other former portfolio managers entered related guilty pleas.
Allianz Global Investors US LLC was accused of misleading pension funds for teachers, bus drivers, engineers, religious groups, and others by understating the funds' risks, and having ‘significant gaps’ in its oversight.
Investors were told the funds employed options that included hedges to protect against market crashes, but prosecutors said the fund managers repeatedly failed to buy those hedges.
Investigators said the misrepresentations began in 2014, and helped Allianz generate more than USD 400 million of net profit.
According to Reuters, more than 100,000 investors were harmed, as they were promised a relatively safe investment with strict risk controls designed to weather a sudden storm, like a massive collapse in the stock market.
Allianz's guilty plea carries a 10-year ban on Allianz Global Investors' providing advisory services to US-registered investment funds. As a result, Allianz plans to move about USD 120 billion of investor assets to Voya Financial in exchange for a stake of up to 24% in Voya's investment management unit.
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