TCW is suing Mr. Gundlach and his key associates in California Superior Court in Los Angeles, charging them with stealing trade secrets to form rival money manager DoubleLine Capital. Mr. Gundlach is countersuing, seeking $500 million in past and future compensation that he says TCW owes him.
Mr. Barach is now president of DoubleLine.
In earlier trial testimony, TCW countered that Mr. Gundlach's termination did not save the company any money because of the acquisition cost of Metropolitan West Asset Management and because the MetWest team had a similar compensation structure to Mr. Gundlach and his group. Mr. Gundlach made more than $40 million at TCW in 2009.
Mr. Barach said he was summoned to Mr. Day's office on Dec. 4 and was told by Mr. Day that an announcement would be going out in a few minutes that Mr. Gundlach had been terminated and that MetWest had been acquired by TCW with a new fixed-income team to replace him.
Mr. Gundlach was considered TCW's star money manager because of his performance on the mortgage-backed securities team, even during the financial crisis when he largely avoided the massive losses that affected other money managers. He was not in charge of any of TCW's equity teams.
Mr. Barach said he resigned on Dec. 5 even though Mr. Day asked him to stay. TCW CEO Marc Stern then met with Mr. Barach at Mr. Barach's home and offered him the vice chairmanship of TCW along with a percentage of the company's profits, which would be bigger than Mr. Stern's. Mr. Barach also said he was offered a percentage of the profits of the new MetWest team.
In court Wednesday, Mr. Barach was questioned by Gregory Weingart, the attorney for DoubleLine and Mr. Gundlach.
Earlier, TCW attorney John Quinn repeatedly asked Mr. Barach if he remembered telling Mr. Stern at the Dec. 5 meeting that he understood why Mr. Stern had done what he had done, a reference to Mr. Gundlach's firing. Mr. Barach first said he couldn't remember making the comment, but later said, “I can't specifically deny it.”
Mr. Barach also said he apologized to Mr. Stern about what had happened at a meeting between him, Mr. Gundlach and other members of Mr. Gundlach's team on Sept. 3 when they announced they would leave together if Mr. Gundlach were to be fired. “I recall telling him I was sorry how the Sept. 3 meeting turned out,” said Mr. Barach upon questioning by Mr. Quinn. At that meeting, Mr. Stern insisted he had no plans to fire Mr. Gundlach, according to previous testimony by several witnesses.
More than 40 members of Mr. Gundlach's mortgage-backed securities team left TCW after Mr. Gundlach was fired; all joined DoubleLine.
Later Wednesday, Gregory Ward, a former vice president in TCW’s institutional marketing group, testified that Mr. Gundlach had asked him to help establish a new money management entity in late September or early October 2009. Mr. Ward, who was terminated with Mr. Gundlach by TCW in late 2009, was DoubleLine’s CFO until he resigned in March 2010.
His testimony, shown on videotape, contradicted that of Mr. Gundlach, who previously said Mr. Ward had approached him.
Mr. Ward said Mr. Gundlach told him that he wanted to get away from TCW, and he asked Mr. Ward to help him do that. Mr. Ward said he believed Mr. Gundlach was planning to initiate a negotiated settlement with the money management firm in January 2010.
Mr. Ward said Mr. Gundlach told him to initiate registration for a new firm before he was fired and Mr. Ward said he filed incorporation papers and registration forms.
Mr. Gundlach had testified that he didn’t even know a firm had to be registered, until he was fired.
Mr. Ward also admitted in his testimony that while still at TCW in the fall of 2009 he obtained a list of the clients of TCW’s mortgage-backed securities team and the specifics of their investments from Cris Santa Ana, a former managing director of Gundlach’s team and now chief risk officer at DoubleLine.
Asked by a TCW attorney if he knew he was violating TCW policy in accessing the confidential data, Mr. Ward said he didn’t think about that. He added the information was needed to fill out the required SEC registration form for the new firm.
Mr. Ward said he left DoubleLine in March 2010 because his job was too stressful.