Illinois Multiemployer Fund Agrees to Repay $8M in Excess Bailout Funds

The repayment is the second related to overpayment of excess funds received from the PBGC in connection with the Special Financial Assistance Program.

The Graphic Communications National Pension Fund, formerly the GCC/IBT National Pension Fund, has agreed to a settlement to repay more than $8 million in excess funds it received under the Pension Benefit Guaranty Corporation’s Special Financial Assistance Program. The fund was also required to pay 2.25% in annual interest on that amount starting from May 14.

In April 2022, the PBGC approved the application submitted to the SFA program by the Carol Stream, Illinois-based pension fund, which covers 31,715 participants in the printing industry. Approximately $1.29 billion in special financial assistance was given to the plan, which had been projected to run out of money in 2022. In December 2022, the PBGC announced it would provide the fund with an additional $227.1 million, raising its total SFA distribution to the fund to more than $1.5 billion.

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The PBGC said that without the SFA assistance, the plan would have been required to reduce its participants’ benefits to the PBGC guarantee levels if it became insolvent, which would have been approximately 15% below the benefits payable under the terms of the plan.

Under the terms of the SFA program, applicants are required to provide documentation of an independent death audit to identify deceased participants. The U.S. Department of Justice said that the Graphic Communications National Pension Fund’s census erroneously included approximately 371 deceased participants.

The error was spotted during an audit conducted by the PBGC’s Office of Inspector General, which determined that the $1.5 billion in funding was overstated by approximately $8 million. The Justice Department said the pension fund cooperated with its investigation and assisted with the actuarial analyses needed to calculate and validate the amount of the excess funds.

“I commend the NPF for its cooperation with the government’s efforts to identify and quantify excess SFA Program funds, as well as its prompt repayment,” Principal Deputy Assistant Attorney General Brian Boynton, head of the Department of Justice’s Civil Division said in a statement.

The PBGC added that it is working with other multiemployer pension plans to facilitate return of excess funds that were allotted based on inaccurate census data.

It is the second settlement involving a pension plan returning excess SFA funds received from the PBGC. In April, The Central States, Southeast and Southwest Areas Pension Plan reached a settlement with the Justice Department to repay approximately $126.6 million in overpayment the pension received from an assistance program. The fund was also required to pay 2.25% in annual interest.

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Tags: GCC/IBT National Pension Fund, Graphic Communications National Pension Fund, Multiemployer Pension Plans, PBGC, Pension Benefit Guaranty Corporation, Pension Funds, SFA, Special Financial Assistance Program

Gregoire Tournant, the former CIO and co-lead portfolio manager for a series of private investment funds managed by Allianz Global Investors, has pled guilty to investment adviser fraud. Tournant allegedly lied to investors, secretly exposed them to risk and sent out altered risk reports.

In 2022, Allianz Global Investors, which is the U.S.-based asset management arm of German insurer Allianz SE, settled Securities and Exchange Commission charges that the firm allegedly conducted “a massive fraudulent scheme” that cost investors more than $5 billion.

The alleged fraud involved a trading strategy called “Structured Alpha,” which used complex options trading to earn returns for investors. Between 2014 and 2020, Tournant was the CIO of the Structured Alpha Funds, which were primarily marketed to institutional investors, including pension funds. According to the allegations in the indictments, Tournant and his co-conspirators concealed the risk associated with how the funds were being managed by providing investors with altered documents to hide the true riskiness of the investment. Tournant also hid the fact that the investments were not sufficiently hedged against risks associated with a market crash.

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This turned disastrous for the funds in March 2020 when the COVID-19 pandemic caused markets to crash. The Structured Alpha Funds lost more than $7 billion in market value, including more than $3.2 billion in principal, faced margin calls and redemption requests, and were ultimately shut down. Approximately 114 institutional investors had bought the investment product and paid more than $550 million in fees, according to an SEC press release from May 2022.

“The defendants lied about nearly every aspect of a highly complex investment strategy they marketed to institutional investors, including pension funds managing the retirement savings of everyday Americans,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement in 2022.

In May 2022, Allianz Global Investors pled guilty to securities fraud in connection with the scheme and was ordered to a pay a criminal fine of approximately $2.3 billion, forfeit approximately $463 million, and pay more than $3 billion in restitution to investor victims.

Tournant pled guilty to two counts of investment adviser fraud, each of which carries a maximum sentence of five years in prison. He also agreed to forfeit approximately $17 million in paid and deferred compensation traceable to his commission of the fraud. He is scheduled to be sentenced Oct. 16.