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El-Erian Clashed With Gross Before Resignation, WSJ Says

Pacific Investment Management Co.’s Mohamed El-Erian clashed with co-founder Bill Gross before announcing last month that he’s leaving the firm, the Wall Street Journal reported.

El-Erian, who was Pimco’s chief executive officer and co-investment chief, disagreed with Gross over trading strategy, personnel decisions, new products and how Gross interacted with employees, the newspaper said in today’s edition, citing people familiar with the firm, without identifying them.

In one meeting in June, as the two men argued over Gross’s conduct, Gross said he had a “41-year track record of investing excellence,” then asked El-Erian what he had, according to the newspaper. El-Erian replied that he was “tired of cleaning up” after Gross, the newspaper said, citing two people who attended the meeting. El-Erian later told Gross he needed to change the way he dealt with people, and Gross agreed to make adjustments, the Journal reported.

Mark Porterfield, a spokesman for Newport Beach, California-based Pimco, declined to comment on the Wall Street Journal story. Gross and El-Erian didn’t respond to e-mails seeking comment.

‘Communications Demerits’

Gross doesn’t like it when employees speak to him on the trading floor or make eye contact, and at times reprimands people for such reasons, the Journal reported, citing the people. He has scolded employees for forgetting to number the pages in their presentations and has given them “communications demerits,” which are tracked to help determine bonuses, the newspaper wrote.

“All of this discourse about an autocratic style from my standpoint and conflict between Mohamed and myself is overblown,” Gross said during an interview on the CNBC television network today. “We had a plan in place to share authority, not just between Mohamed and myself, but between six deputy CIOs.”

John Brynjolfsson, a former fund manager at Pimco, told the newspaper that Gross suggested he write a $10,000 check to Pimco’s charitable organization, after Brynjolfsson didn’t stand during a client tour of Pimco’s offices.

Disagreements between Gross, 69, and El-Erian, 55, became more common as investors started to pull money, the Journal said. Gross told traders late last year that he could run Pimco’s $2 trillion in managed assets on his own, if El-Erian would let him, the newspaper wrote.

‘Superior Results’

“For more than 40 years, Pimco has delivered superior results for our clients, consistently and during periods of extraordinary market volatility,” Gross said in a statement to the Wall Street Journal. “We hold ourselves to the highest standards of excellence and performance, and I ask of others only what I demand of myself: hard work, dedication and intense focus on putting our clients first.”

Gross also restricted trading last summer during difficult market conditions, mostly to sales to meet client redemptions, the Journal reported.

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