A federal judge in New York declined to throw out fraud charges against a former Allianz fund manager who claimed he was double-crossed by his lawyers, citing the terms of a joint defense agreement the executive entered into with the firm’s counsel.
The ruling by Judge Laura Taylor Swain allows federal prosecutors to forge ahead with their prosecution of Gregoire Tournant, a former chief investment officer for one of Allianz’s U.S. investing divisions who was blamed by the firm for losses it suffered during a market meltdown in 2020 sparked by the Covid-19 pandemic.
After being arrested last year and charged with securities and investment adviser fraud, Tournant in January launched his first attack against the government’s case, arguing that prosecutors had encouraged lawyers who were acting for both Allianz and for him personally to use his privileged communications to help build a false narrative against him.
The Munich-based financial services company last year agreed to pay about $6 billion in penalties and restitution to investors in a settlement with prosecutors that resolved its own liability for the market meltdown. The firm admitted to having deficient internal controls but said criminal misconduct was limited to a handful of former employees.
Judge Swain earlier this month ruled against Tournant’s motion to dismiss the government’s charges, but a brief explaining her reasoning wasn’t unsealed until Wednesday.
The U.S. Securities and Exchange Commission began investigating the market meltdown centered on Allianz in August 2020, prompting the firm and a number of executives, including Tournant, to seek legal counsel. Tournant hired an independent lawyer to defend him personally, but also entered into a joint representation with two law firms that were retained by Allianz.
The agreement, which arose from an understanding that the joint representation would be more efficient, required the firm’s lawyers to inform Tournant should they conclude that a conflict of interest had arisen between him and Allianz.
After other executives began shifting blame for the alleged misconduct to Tournant, the law firms in June 2021 terminated their representation of the former fund manager, and went on to argue that prosecutors should charge Tournant and not Allianz.
Tournant in his motion earlier this year said the law firms representing both himself and Allianz should have concluded earlier that there was a conflict of interest between the two parties. Judge Swain in her ruling said the terms of the agreement set a subjective standard, and Tournant couldn’t prove that the firms were actually aware of an earlier conflict.
Ultimately, Tournant had agreed to waive his attorney-client privilege when he entered into a joint defense agreement with Allianz, and he hadn’t demonstrated that prosecutors had been given access to materials that were privileged at the time they were handed over by Allianz and its lawyers, Judge Swain said.
“Mr. Tournant is a sophisticated businessman and a well-educated individual, and he does not argue that he did not understand the terms of the [joint defense] agreement,” the judge ruled. Prosecutors also didn’t inappropriately pressure Allianz’s lawyers to “switch sides,” Judge Swain added.
The ruling is one of several recent court actions pushing back on claims by executives that the way their employers handled internal investigations into allegations of white-collar misconduct violated their due-process rights. Last month, a federal judge ruled against a motion by two former top executives of the New Jersey-based Cognizant, who had claimed the government effectively deputized the software company to conduct an investigation on its behalf.