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Prosecutors: New York investment adviser accused of $ 5 billion fraud | Business

NEW YORK (AP) – Bus drivers, subway conductors and religious and charitable organizations across the country lost more than $ 5 billion when a stock market collapse caused by COVID destroyed private equity funds linked to the financial industry giant, exposing mass 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 LLC, an investment adviser in New York City, in part because the company had previously failed to detect “outrageous, lengthy and costly fraud. ». this was discovered by the Securities and Exchange Commission.

“Before we call you, make sure you call us,” Williams told a news conference, pledging to remain relentless in eradicating corruption in our financial markets.

As part of a deal with prosecutors, Allianz Global Investors US LLC agreed on Tuesday to plead guilty to its role in the fraud from 2014 to 2020 and pay $ 3.2 billion in restitution, $ 2.3 billion in fines and lose $ 463 million. Prosecutors have called it one of the most significant corporate resolutions in history.

AGI US is an indirect subsidiary of Allianz SE, based in Munich, Germany, one of the world’s largest financial services and insurance companies.

The prosecutor also announced conspiracy, securities fraud and obstruction of justice against 55-year-old Gregoire Turnan of Basalt, Colorado, the former chief investment officer of AGI US, which was once worth $ 11 billion. Two other men accused of fraud have pleaded guilty and are cooperating, Williams said.

Williams said Tournant and his accomplices lied to investors and secretly put them at significant risk for illicit profits.

“Pension funds for a large number of retirees, religious organizations and key workers – from Alaska workers to teachers in Arkansas, to bus drivers and subway drivers here in New York – have invested in AGI because they were promised relatively safe investments with strict risk control, ”he said.

But he said that despite Turnan’s claims that the corporate “master cop” was looking over his shoulder, AGI US “slept in time,” and when the market crash caused by COVID occurred, “these investors got wet and lost billions.”

However, SEC law enforcement director Gurbir S. Greval told a news conference that the victims “were or will soon be healthy” from the fraud, which cost them $ 5 billion.

He said the SEC’s fines against AGI US, which include $ 315.2 million in derogations, $ 34 million in interest and $ 675 million in civil fines, were the largest fines in the SEC’s case in two decades. .

In a civil complaint filed with a Manhattan federal court, the SEC said Tournant, his accomplices and his company had implemented a “massive fraud scheme that hid the huge risks of reversing a sophisticated options trading strategy, which they called a ‘structured alpha.’

Gruol said the company earned more than $ 550 million in fees, while “defendants lied about almost every aspect of the very sophisticated investment strategy they provided to institutional investors, including pension funds that manage the retirement savings of ordinary Americans.” .

The SEC said AGI US has sold the strategy to approximately 114 institutional investors, including a pension fund for teachers, clergy, bus drivers, engineers and others.

Meanwhile, Tournant surrendered Tuesday in Denver and was released on $ 20 million bail.

In a statement, his lawyers, Seth L. Levin and Daniel R. Alonso, said the prosecution was “a baseless and ill-considered attempt by the government to criminalize the consequences of the unprecedented market shift caused by COVID in March 2020.”

They said Tournant was an unfair target, especially because at the time he was on long medical leave and funds were thriving under his leadership for 14 years.

“The losses as a result of these events in the market were suffered by perfect institutional investors – including Greg himself, who had significant investments in the fund. Although the losses are regrettable, they are not the result of any crime, ”the lawyers said.

“The government’s attempt to characterize them as such is not only unfairly damaging Greg’s reputation and livelihood, but also extremely dangerous to the market as a whole. Greg is looking forward to vigorous defense in court against these allegations, ”the lawyers added.

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