Finance giant pays $5.8 bil for fund fraud that hurt MTA
German financial services giant Allianz agreed to pay a historic $5.8 billion in penalties for the collapse of investment funds that gutted the retirements savings of more than 100,000 people nationwide, including many New York City transit workers, the feds announced Tuesday.
Manhattan U.S. Attorney Damian Williams called the payback “one of the most significant corporate restitutions in history.” As part of the announcement, Allianz’s New York-based, stateside investment division pleaded guilty to securities fraud. Three portfolio managers, Gregorie Tournant, Trevor Taylor and Stephen Bond-Nelson, also were charged for allegedly giving 114 institutional investors false assurances that their money was safe.
A group of investment funds under the portfolio managers’ control collapsed in March 2020 as the COVID-19 pandemic tanked financial markets, prosecutors said, alleging the team used risky investment strategies.
Among the screwed-over investors were representatives of some of the Metropolitan Transportation Authority’s pensions. Prosecutors said that a portion of the funds belonged to city bus drivers, Staten Island Railway workers and other MTA employees.
“In calendar year 2020, when most pension funds made around 10%, the MTA’s funds made zilch,” Transport Workers Union Local 100 said in a statement.
MTA spokesman John McCarthy said the agency sued Allianz in 2020 and reached a settlement over its affected pension funds.
The fraud was widespread and affected a variety of pensioners, “from laborers in Alaska to teachers in Arkansas,” Williams said. They invested with Allianz Global Investors U.S. LLC because they thought it was a “relatively safe investment with strict risk controls,” the top prosecutor said.
Tournant appeared in federal court in Denver to face conspiracy, securities fraud, investment adviser fraud and obstruction charges. He faces up to 40 years in prison if convicted. He raked in $60 million in personal compensation during the six-year
scheme, from 2014 until 2020. According to the indictment, each year from 2015 to 2019 he was among the top two highest-paid employees of Allianz’s U.S. division.
Taylor and Bond-Nelson pleaded guilty in March and are cooperating with prosecutors in the hopes of a lighter sentence. They face up to 30 and 35 years, respectively.
In a statement, Tournant’s lawyer Daniel Alonso described the feds’ case as a “meritless and ill-considered” attempt “to criminalize the impact of the unprecedented, COVID-induced market dislocation of March 2020.”