Allianz division agrees to pay $6 billion for defrauding teachers, religious groups and foundations
What shape might the next recession take?ReplayMore Videos ... (15 Videos)What shape might the next recession take?Doctor says cow's milk can be used as baby formula substitute in 'dire circumstances'Not lovin' it: How Russians reacted to McDonald's closing'I do not have an explanation': Pentagon official shows video of unidentified objectRyanair CEO blasts Boeing in expletive-laden remarks about slow delivery of 737 jetsHow China's workers are faring during a tumultuous supply chain crisisSnapchat CEO surprises Otis College's newest graduates by paying off their student loansStablecoins faltering amid crypto market volatilityMother describes 'anxiety provoking' search for baby formulaUS farmers stressed amid severe drought and inflationAirbnb CEO: 'We're not pulling on the brakes, we're stepping on the gas' 'It feels overwhelming': Business owner on the impact of inflationMeet the 100-year-old man who's worked at the same company for 84 yearsThis toxic lake has enough lithium to supply US electric vehicles for decadesWatch what this Kawasaki factory in Nebraska did to attract workersNew York (CNN Business)A US division of German insurance firm Allianz will pay more than $6 billion for what US investigators called a "massive fraudulent scheme" that involved the investments of public pensions, religious organizations and other foundations.
The settlements with the US Department of Justice and US Securities and Exchange Commission are among the largest in corporate history. The company and three of its portfolio managers agreed to plead guilty to federal fraud charges as part of the settlements.The Justice Department said Tuesday that Allianz Global Investors failed to stop a scheme to defraud investors in funds that collapsed during the 2020 Covid recession. AGI is a subsidiary of Allianz SE, one of the biggest names in the financial world with over $2 trillion in assets under management.The scheme, said investigators, manipulated investors to put $11 billion into complex funds they dubbed "Structured Alpha.'' The portfolio managers mislead investors about the risk levels and altered documents to make the funds look safer than they were, the DOJ and SEC said. The firm ultimately made about $550 million in fees associated with the funds. Transit workers, truckers and teachers say Allianz gambled away billions in pensionsThe pitch to investors was simple enough: create a portfolio of debt or equity securities and use it as collateral to purchase and sell options. The strategy exposed investors to a lot of debt and equity that Alianz managers said was hedged just in case markets became volatile. Read MoreBut executives failed repeatedly to make those hedges and inflated fund performance to boost their own pay while collecting 30% performance fees, said prosecutors.The plan worked while markets thrived but quickly fell apart during the high volatility of the March 2020 market sell-off when the funds of hundreds of institutional investors, including the pensions that managed retirement plans of Arkansas teachers and New York City subway workers, lost billions of dollars. The funds' former chief investment officer, Gregoire Tournant, was indicted on criminal charges including conspiracy, securities fraud and obstruction of justice. Two other managers, Stephen Bond-Nelson and Trevor Taylor, pleaded guilty in February to charges including securities fraud."Allianz Global Investors admitted to defrauding investors over multiple years, concealing losses and downside risks of a complex strategy, and failing to implement key risk controls," said US Securities and Exchange Commission chairman Gary Gensler Tuesday. "The victims of this misconduct include teachers, clergy, bus drivers and engineers, whose pensions are invested in institutional funds to support their retirement."Allianz said in a statement that the criminal misconduct was done by a few individuals who no longer work for the company and that the Justice Department's investigation didn't find misconduct elsewhere. Because of the guilty settlement, Allianz is no longer permitted to perform advisory services for certain funds in the United States. The company announced Tuesday that it has a preliminary deal to transfer the management of about $120 billion in assets to Voya Financial.Click Here To Get Funded!