AllianzGl’s unprecedented fall ends with U.S. ban
Arthur Jakoby, co-chair of Herrick's Securities Litigation and Enforcement Department, spoke to Pensions & Investments about the SEC investigation of Allianz Global Investors and its Structured Alpha money management subsidiary, and the subsequent charges and multi-billion-dollar settlement.
The investigation unearthed that three portfolio managers ran a "massive fraudulent scheme," according to the SEC. The company pled guilty to the SEC's charges and agreed to pay more than 6 billion dollars and sell most of its U.S. business to Voya Financial.
Arthur reflected that the magnitude of the restitution is unprecedented, explaining, "That's a 71.4 percent recovery... That's huge. In recoveries, investors usually get 50 cents on the dollar back. Here, the SEC achieved an incredible result."
According to the SEC, Gregoire P. Tournant, the lead of the portfolio managers made "multiple efforts to conceal the misconduct."
The article cited Arthur's representation of Bernard L. Madoff Investment Securities' victims and how he was formerly a special trial counsel in the SEC's division of enforcement. He reflected that the SEC and the U.S. attorney's office pursued Mr. Tournant with fury, primarily because of his cover-up. Arthur explained, "He lied and obstructed the government's investigation... Very often, the cover-up is often much worse than the crime itself. You know, cover-ups, investigation obstructions, manipulation of data, falsification of evidence, it's the kind of stuff that invigorates prosecutors."
Arthur said a major takeaway from the AllianzGI penalty is that "large Wall Street financial institutions which fail to supervise their employees are targets of the SEC and the U.S. attorney's office." He explained, "What often happens when the SEC goes after an employee of the financial institutions... the financial institution very quickly starts to cooperate, throw the employee under the bus, the employee is forced to plead guilty and is enjoined by the SEC from further violating the law." He added, "This time, however, the SEC investigation resulted in the corporate entity being forced to plead guilty to the charges."
Arthur concluded, "I think this is a loud and clear message to financial institutions that the days of prosecuting the employees and letting the financial institution itself get off with a fine or a mere slap on the wrist is over."
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