Gundlach Says He, TCW Managers Opposed Stern’s 2009 Return
DoubleLine Capital LP’s Jeffrey Gundlach told a jury he and other group managers at TCW Group Inc. opposed the appointment of Marc Stern as chief executive officer in June of 2009, six months before Gundlach was fired.
Gundlach, testifying for a third day in the trial that pits him and three other former TCW employees against the asset- management firm, said he told Stern, who had stepped down as the company’s president in 2005, and TCW founder Robert Day that they couldn’t just “breeze” back in, after he and the other managers had kept TCW going through the financial crisis.
“I expressed my view that it was not a good idea,” Gundlach told a Los Angeles jury yesterday, referring to a meeting with Day and Stern in May of 2009 at Day’s house before the news of Stern’s return to active management was made public.
Mark Attanasio, who co-ran TCW’s leveraged finance group that separated from the firm last year, was “even more negative than me” about the appointment, Gundlach said. Five TCW managers said in a letter to Societe Generale SA, TCW’s parent company, that bringing an executive back from retirement would be a “major step backward,” Gundlach testified.
The only concession the managers got was that Stern was named interim chief executive, Gundlach said.
Los Angeles-based TCW fired Gundlach, 51, in December 2009 and sued him the following month after more than half of its fixed-income professionals joined his new firm. TCW seeks $375 million in damages, claiming Gundlach stole its trade secrets, including client portfolio data, to start DoubleLine.
‘Through the Roof’
Gundlach, who had worked at TCW for 25 years and who was named Morningstar’s Fixed Income Manager of the Year in 2006, countersued, saying TCW fired him to avoid having to pay management and performance fees for the distressed-asset funds his group managed and that went “through the roof.” Gundlach seeks about $500 million.
TCW alleges that Gundlach had become increasingly difficult to work with and was openly hostile to Stern. The company says it put Gundlach on leave Dec. 4, 2009, the day it announced that it had acquired Metropolitan West Asset Management LLC to manage the fixed-income portfolios of Gundlach’s group. DoubleLine contends Gundlach was fired Dec. 4, not just put on leave.
DoubleLine’s lawyers have said that TCW executives started looking at ways to force Gundlach out as early as June of 2009.
Gundlach testified yesterday that when Jacques Ripoll, Societe Generale (GLE)’s head of Global Investment Management Services, came to Los Angeles in September of 2009 to meet with TCW executives, he had showed no interest in what Gundlach had to say about the direction of the firm.
‘Piece of Cardboard’
“It was like talking to a piece of cardboard,” Gundlach said, adding that it made him think TCW was pushing him out.
Gundlach said under cross-examination from DoubleLine lawyer Mark Helm that at the time of a Sept. 3, 2009, meeting with Stern, when he thought he was about to get fired, he told members of his mortgage-backed securities group, to make copies of files that might be useful if he were fired, including client holdings and contact information.
Gundlach, whose group managed more than half of TCW’s $110 billion assets under management, testified that he immediately reversed himself as he realized that they could get the information from the clients directly.
The reversal of his instruction was “kind of a stage aside,” Gundlach said.
The money manager, whose new firm has about $14 billion under management, testified earlier yesterday that he was “furious” when he learned an employee had failed to immediately turn over a device belonging to TCW in violation of DoubleLine’s policy to return all TCW devices and information.
“I yelled at everybody,” Gundlach said, describing a meeting with DoubleLine staff after he found out in early 2010 that one of them, Jeffrey Mayberry, had been late returning a computer drive with TCW files. “I told them this was unacceptable.”
TCW argues that Gundlach wouldn’t have been able to get DoubleLine started within weeks after he was fired if he hadn’t had access to TCW trade secrets and confidential information.
Gundlach said yesterday that from when DoubleLine started on Dec. 14, 2009, the policy had been not to use any TCW files they still had and to return them to TCW.
The case is Trust Co. of the West v. Gundlach, BC429385, California Superior Court, Los Angeles County.
To contact the reporters on this story: Edvard Pettersson in Los Angeles at firstname.lastname@example.org