Trust Company of the West is on the war path.
Jeffrey Gundlach, one of the biggest names in bond investing, was sued by TCW, the Societe Generale unit that fired him in early December.
TCW has suffered. Gundlach has poached 40 former colleagues for a new investment company; TCW clients have withdrawn billions of dollars from the firm’s bond funds; and a public-private partnership with the U.S. Treasury has been suspended.
The accusations against Gundlach aren’t pretty:
First, there’s stealing and lying:
Reuters: …said in its lawsuit filed on Thursday that the award-winning bond fund manager had misappropriated trade secrets, interfered with the firm’s contractual relationships with clients and committed civil conspiracy among other charges.
In the complaint, TCW said it found evidence that several of Gundlach’s colleagues who joined him at DoubleLine had spent weeks downloading investment positions, analytical software and proprietary information about clients to portable computer drives.
Then, there are the drugs:
Reuters: Drugs and pornographic materials, discovered in Gundlach’s office after he was fired, violated the firm’s employment regulations, the lawsuit said.
The firm said in the lawsuit that an examination of Gundlach’s office on Dec. 4, the day he was fired, revealed “plastic containers and bags containing green leafy substances and seeds, some explicitly labelled marijuana, as well as three tin foil tubes, the ends of two of which were burnt.”
For good measure, the suit says he kept porn in the offices too, a violation of company policy:
Reuters: According to the lawsuit, the office also contained dozens of pornographic magazines and videos.
Gundlach, via his recently created DoubleLine firm, says the charges are false in this media statement:
The allegations in the complaint are meritless and will be proven so in a court of law. TCW’s lawsuit is a blatant attempt to damage DoubleLine’s business and clients…The false and hyperbolic personal attacks by TCW are obviously a gratuitous and irrelevant gutter tactic, which merely underscores the weakness of TCW’s claims.
Before the problems began, Gundlach made TCW big profits by avoiding the worst of the housing and financial crisis.
Los Angeles Times: His $12-billion-asset TCW Total Return bond fund has gained an average of 9.1% a year over the last three years, beating 99% of its peer bond funds.
Besides unspecified monetary damages, TCW wants nothing less than ownership rights of Gundlach’s new firm.