Accused Hedge-Fund Fraudster Not So Sure It’s OK For Feds To Bully His Lawyers Into Betraying Him

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Accused Hedge-Fund Fraudster Not So Sure It’s OK For Feds To Bully His Lawyers Into Betraying HimBeware friendly-seeming bosses bearing joint representations.

• Author:Jon Shazar
• Publish date:Jan 31, 2023

Beware friendly-seeming bosses bearing joint representations.

The matter of the collapse of two Allianz hedge funds in the early days of the COVID-19 pandemic taught us—or those who hoped to hide their fraud behind a little global plague, or really in any way—that it’s always a good idea, when confronted by the authorities with evidence that you just lied to their faces, to have a better plan than to ask to use the facilities before walking straight out the front door.

But its pedagogical gifts do not end there. For instance, when approached by your employers and their high-powered law firms suggesting that it would be best to handle such inquiries as a team, think twice.

Sullivan & Cromwell and Ropes & Gray said a joint representation would be more efficient, said [former Allianz Global Investors chief investment officer Gregoire] Tournant. The arrangement appears to have been made at a time when both parties anticipated that their legal interests would be similar. The firms’ agreements required them to inform Mr. Tournant in the event that a conflict of interest arose, according to his motion…. Company lawyers continued meeting with Mr. Tournant in their capacity as his lawyer, but Sullivan & Cromwell had begun to conduct an investigation that would lead them to suggest to the government that he had committed wrongdoing, he said.

Seems the spirit of camaraderie came undone when the aforementioned hall-pass user, Gregoire’s subordinate Stephen Bond-Nelson, sought to make amends for his flight from the Securities and Exchange Commission by agreeing to spill the beans. This spooked Allianz, which quickly signed a separate peace with the Justice Department and allegedly threw Tournant to the prosecutorial wolves.

In his brief, Mr. Tournant excerpted a slide containing photos of himself and two other former Allianz executives, which his lawyers likened to a most-wanted poster. The slide was part of a presentation the company gave to the Justice Department prior to its settlement…. “DOJ will have a strong case against the wrongdoers, in part due to AGI US’s cooperation,” the slide by the company’s lawyers read.

So, certainly, there’s a lesson for Tournant and those similarly situated, which is that Sullivan & Cromwell and its ilk won’t think twice about whose side to take in a joint representation when one side is a soon-to-be-former hedge-fund manager and the other is the 35th-biggest public company on planet Earth. But Tournant would also like there to be a lesson for the Justice Department about suborning someone’s lawyers into betraying them to save a more important client.

Justice Department officials have pointed to the Allianz case as an example of how they intend to crack down on corporate fraud. Mr. Tournant’s motion takes direct aim at that campaign, saying it was prosecutors’ efforts to scare companies into cooperating with them that led the firm and its lawyers to use him as a scapegoat…. He argued that the legal arrangements made by Allianz during its investigation had led to a situation where his lawyers had essentially become informants against him.

He has asked the judge overseeing the case to dismiss the charges against him as a result, or to hold a hearing to determine the extent of prosecutors’ interactions with his former lawyers.

Former Allianz Fund Manager Accuses Firm and Its Lawyers of Double-Crossing Him [WSJ]

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Tagsterms:Stephen Bond-NelsonEveryone Learns SomethinglawfraudHedge FundsAllianz Global InvestorsLisa MonacoJustice DepartmentGregoire TournantLawyerscrime

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