Gregoire Tournant, the former Chief Investment Officer at Allianz SE’s US-based Structured Alpha hedge funds, has been sentenced to 18 months of home confinement for his role in a fraud that contributed to $3.2bn in investor losses, according to a report by Bloomberg.
The penalty, handed down by US District Judge Laura Taylor Swain in Manhattan, also includes three years of probation but falls significantly below the seven-year prison term sought by federal prosecutors.
Tournant, who pleaded guilty in June to two counts of investment adviser fraud, admitted to inflating the value of the Structured Alpha funds, allowing him to earn tens of millions of dollars in performance-based compensation. Prosecutors alleged that his deceptive practices misled investors, including 114 pension funds and institutional clients, about the risks associated with the funds.
Despite the prosecutors’ claims, Judge Swain ruled that they failed to directly link the $3.2bn in investor losses to Tournant’s misrepresentations. Instead, the judge determined the financial loss attributable to his actions was zero for sentencing purposes, citing broader market conditions during the pandemic as the primary driver of the losses.
Tournant’s severe health issues played a pivotal role in the sentencing, with his lawyers arguing that his complex medical needs would make imprisonment overly punitive and potentially life-threatening. Details of his health conditions remain redacted from public filings, but Tournant appeared visibly unwell during court proceedings, coughing frequently and expressing remorse for his actions.
The sentencing follows a 2022 plea agreement in which Allianz Global Investors US, a unit of Allianz SE, admitted to securities fraud and agreed to pay $6bn in penalties and restitution for misrepresenting investment risks tied to Structured Alpha funds. The funds, which once managed $11bn, suffered catastrophic losses during the early months of the Covid-19 pandemic, wiping out over $7bn, including $3.2bn in investor principal.
Two of Tournant’s former colleagues, Stephen Bond-Nelson and Trevor Taylor, have also pleaded guilty in the case and are cooperating with prosecutors. They are scheduled for sentencing in February, with hopes of reduced penalties in exchange for their cooperation
