Fired TCW Chief Investment Officer Jeffrey Gundlach spent his last months at the company claiming he had job offers from PIMCO and Western Asset Management, according to court testimony Tuesday.
Michael Conn, then a TCW senior vice president, testified that Mr. Gundlach told Gary Shedlin, a consultant studying TCW’s operations in the summer of 2009, that PIMCO would be happy to have him as a replacement for co-CIO Bill Gross and that he was also talking to WAMCO.
Mr. Conn testified that Mr. Gundlach said PIMCO is “dying” to hire me.
Mr. Conn said he attended the meeting between Messrs. Gundlach and Shedlin.
The testimony came in the trial resulting from a TCW suit, alleging Mr. Gundlach and key associates stole trade secrets to help form their new firm, DoubleLine, in December 2009. Mr. Gundlach and DoubleLine have countersued, saying TCW fired Mr. Gundlach in early December 2009 because the company did not want to pay him incentive fees and future and back compensation, totaling more than $500 million. The trial is being held in California Superior Court in Los Angeles.
According to Mr. Conn, Mr. Gundlach also was displeased at the suggestion by the consultant that TCW could be bought by a private equity firm. “He didn’t want some ---hole squeezing the business,” Mr. Conn said Mr. Gundlach told Mr. Shedlin. Mr. Conn said he was “shocked” by Mr. Gundlach’s language.
Mr. Conn also described Mr. Gundlach’s behavior in the company lunchroom, saying that on various occasions he called former CEO Robert Beyer “f------ useless” and CEO Marc Stern “useless.”
Mr. Conn referred to an Aug. 27, 2009, note that he drafted at a meeting with Mr. Stern and other top TCW officials to discuss Mr. Gundlach’s status. The note questioned whether Mr. Gundlach could be terminated for cause, and in testimony, Mr. Conn explained that was a reference to Mr. Gundlach’s behavior in talking with PIMCO and WAMCO.
The cross-examination of Mr. Conn, who’s now head of corporate strategy for TCW, began with the playing of a videotaped deposition in which he denied remembering the Aug. 27 meeting.
A key piece of evidence at the trial that has been presented by Mr. Gundlach’s lawyers is Mr. Conn’s handwritten notes of that meeting, including what appears to be a partially written news release stating, “Unfortunately we had to terminate Jeffrey Gundlach.”
Later in the videotape, when shown the notes, Mr. Conn acknowledged they were his.
Mr. Gundlach’s lawyers have been trying to prove that a plan to terminate TCW’s then-CIO had been in the works for months and began before Sept. 3, 2009. TCW CEO Marc Stern has said it was on that date that he became concerned Mr. Gundlach was planning to leave and that he started trying to find a replacement in earnest. Mr. Stern has acknowledged earlier meetings about Mr. Gundlach’s employment, but insists that until Sept. 3, any discussion of a replacement was exploratory.
Later during the cross-examination, Mr. Gundlach’s lawyers pushed to present Mr. Gundlach as a more thoughtful employee. Mr. Conn, under questioning, disclosed Mr. Gundlach had told Mr. Shedlin that TCW’s problems included the fact that portfolio managers were paid too much money and TCW didn’t know its place in the asset management world.
Mr. Conn also testified that Mr. Gundlach was critical of former CEO Robert Beyer because Mr. Gundlach felt Mr. Beyer was trying to make TCW, with its various semi-autonomous investment teams, operate more like BlackRock but without the necessary infrastructure.