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Jeffrey Gundlach testifies in TCW trial

Bond fund manager Jeffrey Gundlach insists he was not aiming to leave the firm.

August 12, 2011|By Tom Petruno, Los Angeles Times
  • Jeffrey Gundlach launched his own firm, DoubleLine Capital, 10 days after he was fired by TCW.
Jeffrey Gundlach launched his own firm, DoubleLine Capital, 10 days after… (Jessica Rinaldi, Reuters )

Star Los Angeles bond fund manager Jeffrey Gundlach found his character on trial as he took the stand for the first time in his high-stakes court battle with his former employer, money management giant TCW Group Inc.

TCW's lead attorney, John Quinn, sought to convince the jury Thursday that Gundlach was disloyal to TCW and to his own longtime fund co-manager and that Gundlach's conduct left the firm little choice but to oust him in December 2009.

In May 2009, Gundlach wrote in an email to another TCW fund manager that "the war is on" with the firm's top management over TCW's future, Quinn told jurors as he displayed that email and others on a screen in the courtroom.

Gundlach launched his own firm, DoubleLine Capital, 10 days after he was fired by TCW. He was quickly joined by most of his TCW team members and has since attracted $14 billion from investors.

TCW, which manages about $120 billion in assets, sued Gundlach in January 2010, alleging that he and key aides conspired to abandon the firm and stole massive amounts of TCW proprietary information that they used to set up DoubleLine almost overnight.

Gundlach, 51, countersued, accusing TCW and its parent firm, French bank Societe Generale, of firing him after 24 years at the firm to cheat him out of a huge chunk of promised income. He denies using any TCW proprietary information to create DoubleLine.

Each side is seeking hundreds of millions of dollars in damages from the other.

The civil jury trial, in Los Angeles County Superior Court, is a rarity in the corporate world, where most such disputes are settled out of court to prevent potentially embarrassing or damaging information from becoming public.

Gundlach, who has referred to himself as "amazingly brilliant analytically," has become a well-known figure on Wall Street because of his expertise investing in complex mortgage-backed bonds.

TCW's attorneys have portrayed him as arrogant, greedy and bent on destroying TCW if he couldn't get control of it after rising to become the firm's chief investment officer.

Quinn showed the jury an email Gundlach sent in May 2009 to his longtime fund co-manager, Phil Barach, after Barach told Gundlach that TCW's incoming chief executive had asked to have lunch with him.

The new CEO, Marc Stern, was returning to TCW after retiring several years earlier, and had a friendship with Barach, Quinn said.

Referring to the lunch overture as "pathetic," Gundlach said in his email that he could "strangle the two of them for treating you this way," referring to Stern, 66, and to TCW founder and Chairman Robert Day, 67.

Gundlach testified that he thought Stern and Day were "dividing and conquering," trying to gain Barach's confidence so they could fire Gundlach while retaining Barach.

In another email, Gundlach wrote to one of his lieutenants in August 2009 regarding a meeting that a large TCW client had requested. The client wanted some assurance that the mortgage-bond team at TCW had depth beyond Gundlach's own well-known abilities.

In the email, Gundlach said it was imperative that "the truth of my primary role is communicated," and he appeared to disparage Barach by saying that his co-manager had a "proven track record" of trying to "gild the lily" about his own talents.

Confronted with the email, Gundlach testified: "I shouldn't have said that. It's not right."

Quinn also asked Gundlach about an email in May 2009 saying that Gundlach wasn't willing to work to improve TCW for its French parent company "without a reward."

Gundlach earned $40 million in 2009, Quinn told the jury. "I actually should have made a little more than that," Gundlach interjected.

But he said the reward he and other top managers wanted was part ownership of the firm, something he said had been promised to TCW executives years earlier but never delivered.

Gundlach said he was trying to work toward preparing TCW for the future and believed that younger executives at the firm should have been steering the company. He insisted that he was not aiming to leave the firm.

"I loved TCW," he said.

Gundlach will return to the stand Monday.

tom.petruno@latimes.com

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