Pimco Seeks to Toss Gross's Claims as ‘Reputational Warfare’

Bill Gross. Photographer: Andrew Harrer/Bloomberg

Bill Gross. Photographer: Andrew Harrer/Bloomberg

  • Co-founder's lawsuit called more screenplay than court filing
  • Gross claims he was forced out to avoid $200 million bonus

Pacific Investment Management Co. fired back at the co-founder who oversaw the firm’s ascent for 43 years, saying Bill Gross’s lawsuit over his departure looks more like a screenplay than a legal filing and should be thrown out.

Gross’s claims that Pimco forced him out to avoid paying him a $200 million cut of last year’s bonus pool have no basis in law and amount to “reputational warfare,” the investment management company said Monday in its first response in court to the lawsuit.

“Mr. Gross’s complaint is a legally groundless and sad postscript to what had been a storied career at Pimco,” according to a copy of the filing provided by the company. “This suit is only the latest step in Mr. Gross’s effort to resurrect a personal reputation damaged by his own unacceptable behavior.”

Last month Gross sued Pimco, once the manager of the world’s largest bond fund, claiming he was forced out by a “cabal” of managing directors and that his share of last year’s profit was illegally withheld.

Pimco’s assets have begun to stabilize after Gross left suddenly in September 2014. At its height in 2013, Pimco oversaw about $2 trillion in assets. As of Sept. 30, that had dwindled to $1.47 trillion.

Gross sued Newport Beach, California-based Pimco on Oct. 8, a little more than a year after his departure for Janus Capital Group Inc. He seeks “hundreds of millions of dollars,” claiming wrongful termination and breach of written contract.

Pimco argues Gross can’t claim he had a contract that was broken, was forced to resign, or was entitled to a third-quarter bonus, Pimco said. That filing couldn’t be confirmed immediately in state court in Santa Ana, California.

Falling Out

His departure followed a public falling out with others at the firm he co-founded in 1971. Having built Pimco on fixed-income investments, Gross opposed the company’s expansion into higher-risk asset classes such as equities, commodities, real estate and hedge fund-like products, according to his lawsuit.

Pimco, now a unit of Munich-based Allianz SE, hired lawyer David Boies, chairman of Boies Schiller & Flexner LLP, to defend it. Pimco asked for a March hearing on its bid for throwing out Gross’s claims.

Gross and his lawyers are confident in their case, Patricia L. Glaser, one of his attorneys, said in an e-mailed statement.

“We are disappointed that Pimco has chosen to use a procedural tactic to delay getting to the merits of the case,” Glaser said. “Pimco’s papers do not dispute the substance of Mr. Gross’s allegations in any material way.”

Pimco declined to comment beyond the filing, Michael Reid, a spokesman in New York, said. 

Janus Fund

Gross now manages the $1.39 billion Janus Global Unconstrained Bond Fund, which is down about 1.33 percent this year, according to data compiled by Bloomberg. About half of the money in the fund is from Gross’s $2 billion personal fortune. Gross has said he will donate any award or settlement from the lawsuit to charity.

Janus declined to comment on the lawsuit, which is “a personal matter for Bill and unrelated to his work at Janus,” Erin Passan, a spokeswoman for the Denver-based firm, said in a phone interview.

Gross hasn’t had much success with his new fund at Janus. It has lost 3.8 percent since Gross started running it, compared with a 1.8 percent gain for the Barclays US Aggregate Bond Index over the same period.

And while the Janus fund attracted $5.9 million last month, Bloomberg reported this month that George Soros, who committed money to a Gross-managed account after he moved to Janus, had pulled $490 million, almost all of his firm’s original investment.

Gross’s departure was preceded by the resignation of Pimco Chief Executive Officer Mohamed El-Erian, considered Gross’s heir apparent, in January 2014. The struggle that followed resulted in a management reshuffle that strengthened control by some of the firm’s younger executives.

The case is Gross v. Pacific Investment Management Company LLC, 30-2015-00813636, Orange County Superior Court (Santa Ana, California).

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