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Tournant pleaded guilty to investment adviser fraud

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Prosecutors sought at least seven years prison for

Tournant

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Defense cited health issues, urged no prison time

By Luc Cohen

NEW YORK, Dec 6 - A former Allianz fund

manager was spared prison time on Friday over his role in a

meltdown of private investment funds sparked by the COVID-19

pandemic that caused an estimated $7 billion of investor losses.

Gregoire Tournant, 57, of Basalt, Colorado, pleaded guilty

in June to two counts of investment adviser fraud. He agreed to

give up $17.5 million in ill-gotten gains, including bonuses

that were inflated by his fraud.

Chief Judge Laura Taylor Swain of the federal court in

Manhattan sentenced him to 18 months home confinement and three

years probation.

Tournant's defense lawyers had urged Swain to spare him

prison time, citing health issues. They also said Tournant had

expressed remorse, and called the case less serious than the

typical investment adviser fraud scheme.

"We are deeply appreciative to the Court for imposing this

just sentence and recognizing that incarceration was not

appropriate in this case," defense lawyers Seth Levine and

Daniel Alonso said in a statement.

Prosecutors with the U.S. Attorney's office in Manhattan had

recommended that Tournant be sentenced to at least seven years

in prison. They argued that more than 100 investors in

Tournant's funds lost billions of dollars when they collapsed,

and that he continued to minimize the importance of what he had

done.

The case stemmed from the March 2020 collapse of the German

insurer's now-defunct Structured Alpha funds, which Tournant had

created and oversaw as chief investment officer.

In May 2022, Allianz agreed to pay more than $6 billion and

its U.S. asset management unit pleaded guilty to securities

fraud to resolve government probes into the collapse. Two other

former Allianz fund managers pleaded guilty at the time.

The Structured Alpha funds had bet heavily on stock options,

in a manner designed to limit losses in a market selloff, which

Tournant likened to a form of insurance.

Prosecutors said Tournant misled investors about the funds'

risks by altering performance data and diverging from his

promised hedging strategy, and obstructed a U.S. Securities and

Exchange Commission probe by directing a colleague to lie.

The funds once had more than $11 billion of assets under

management, but lost about $7 billion in February and March 2020

as the start of the pandemic set off a worldwide market panic.

Prosecutors said the fraud ran from 2014 through March 2020,

with Tournant being paid more than $60 million over that time.