German insurer Allianz has agreed a $6bn settlement with US authorities and its investment arm has pleaded guilty to securities fraud after a scandal at its funds business left investors nursing losses.
Gregoire Tournant, chief investment officer and co-lead portfolio manager for the funds, has also been indicted for conspiracy to commit securities fraud, investment adviser fraud and the obstruction of justice, according to a legal filing.
A plea agreement disclosed by the US Department of Justice on Tuesday said Allianz would pay a fine of $2.3bn, a restitution of $3.2bn and $463mn in forfeiture over the episode.
The insurance group was hit with lawsuits from investors after heavy losses suffered by the funds during the early market turmoil created by the coronavirus pandemic. The Arkansas Teacher Retirement System, one of the investors, accused Allianz’s funds arm of employing a “reckless strategy” that abandoned risk controls to place bets against further volatility.
Allianz announced on the eve of its first-quarter results earlier this month that it had set aside another €1.9bn for payouts over the scandal, taking the total to €5.6bn, or about $5.9bn.
Its share price is down 8 per cent over the past year, having recovered ground after the group first warned on profits in August due to the situation over the US funds, known as “structured alpha”.
It also agreed to pay a civil fine of $675mn in a settlement with the Securities and Exchange Commission, according to legal filings.
Allianz did not immediately provide a comment. Tournant did not immediately reply to a message for comment.