Robert Beyer, TCW Group's former CEO, testified on Thursday that his onetime chief investment officer, Jeffrey Gundlach, admitted to him in May 2009 that he might leave the firm to go to Western Asset Management.
Mr. Beyer said at the trial in California Superior Court in Los Angeles that he asked Mr. Gundlach for a meeting after hearing rumors that his star money manager was going to leave TCW and join WAMCO.
Mr. Beyer testified he was about to leave for a trip to the Middle East to assure nervous investors there about the stability of their investments with Mr. Gundlach's mortgage-backed securities team. Mr. Beyer wanted to be sure that Mr. Gundlach was staying with the firm before he talked with the investors.
“Maybe I will,” Mr. Gundlach told Mr. Beyer, according to his testimony.
“Jeffrey, that's not enough,” Mr. Beyer said he told Mr. Gundlach. “I need a better answer.”
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 Capital, 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 and his team incentive fees, and future and back compensation, totaling more than $500 million.
Mr. Beyer said Mr. Gundlach assured him that any plans to leave TCW were not imminent. Mr. Beyer said he told Mr. Gundlach that if he wanted to leave TCW, “we need to do it the right way.” He told Mr. Gundlach that terms of his departure would have to be negotiated to ensure the stability of client investments. Mr. Gundlach indicated he understood, Mr. Beyer testified.
TCW fired Mr. Gundlach in December 2009 after company officials said they uncovered an active plan by him and key associates to steal trade secrets to help them start DoubleLine Capital. TCW is seeking $375 million in damages, while in Mr. Gundlach's countersuit, he is seeking $500 million in back and future compensation.
Mr. Beyer's testimony also focused on the terms of TCW's compensation agreement with Mr. Gundlach. Mr. Gundlach and TCW agreed to new financial terms for him and his MBS team in May 2007, but Mr. Gundlach never signed the agreement.
Attorneys for Mr. Gundlach on Thursday showed TCW documents that indicated that officials at the firm agreed to the new pay plan that required Mr. Gundlach to pay greater overhead costs for his team in exchange for a larger percentage of profits if investment results were good. But Mr. Beyer, when questioned later by TCW attorneys, said there was no overall contract in place because Mr. Gundlach never signed it. Mr. Beyer said that's why he did not tell Mr. Gundlach that he couldn't leave when he threatened to so do in May 2009.