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July 12, 2023 at 04:02 PM
A New York judge ordered a unit of Allianz SE to pay about $6 billion as punishment for misrepresenting the investment risk posed by a group of hedge funds that collapsed amid market fluctuations caused by the Covid-19 pandemic.
U.S. District Judge Colleen McMahon imposed the sentence Wednesday in Manhattan on Allianz Global Investors U.S., which had agreed to the payout last year when it pleaded guilty to a single criminal charge of securities fraud as part of a deal with federal prosecutors.
It ends an embarrassing chapter for the unit’s corporate parent, the German insurance giant.
“This is a sad and sorry state of affairs,” McMahon said in describing the criminal conduct admitted by AGI. “The amount of money that is being paid over and forfeited is astronomical, certainly in my experience.”
AGI was automatically disqualified from acting as an investment adviser or principal under-writer for any mutual fund or closed-end fund for 10 years.
Allianz agreed last year to transfer most of AGI’s U.S. assets to Voya Financial Inc. AGI planned to dissolve shortly after the sentencing, according to a July 5 letter to the judge by both sides.
In addition to the payments, AGI was sentenced to five years’ probation, which will be discontinued once it no longer exists, McMahon said.
Unusual Plea
The Allianz unit’s guilty plea is unusual for a major financial firm. Companies more often resolve government investigations by paying money and pledging corrective actions without admitting any wrongdoing.
The judge said AGI is the first corporation she has sentenced in her 25 years on the bench.
