Jeffrey Gundlach insisted on Thursday that TCW didn't live up to its end of the bargain and failed to pay him his full compensation after he was fired as chief investment officer in early December 2009.
“Even if you're flipping hamburgers at McDonald's, you should get a paycheck,” Mr. Gundlach said in California Superior Court in Los Angeles.
In his countersuit against TCW, Mr. Gundlach insists he is owed more than $500 million in compensation, much of it incentive fees for investments he ran in closed-end mortgage security funds that he managed for TCW before his termination. His testimony ended Thursday.
TCW is suing Mr. Gundlach for $400 million in damages, accusing him and key associates of stealing trade secrets in connection with his startup of a rival money management firm, DoubleLine Capital, which Mr. Gundlach founded within days of leaving TCW.
Much of Thursday's testimony centered on Mr. Gundlach's claims for compensation. Mr. Gundlach was TCW's highest-paid employee; as chief portfolio manager of the company's mortgage-backed securities team, he made more than $40 million in 2009.
Mr. Gundlach insists he was fired because TCW did not want to pay him the bulk of his compensation that was to come from the mortgage-backed securities funds.
TCW witnesses have testified that it is not normal asset management practice to pay incentive fees until the profits and principal of closed-end funds are returned to participants.
Mr. Gundlach seemed annoyed as TCW attorney Steve Madison repeatedly asked him how he could receive incentive fees for funds that had not been closed and that TCW had not yet collected fees from participants. Mr. Gundlach responded, “I was willing to wait until TCW collected its fees.” The long-term closed funds were started in 2007 and 2008, and were expected to run an average of seven years.
TCW has also argued that Mr. Gundlach did not have a contract because he never signed a new five-year contract that was offered to him in May 2007, but testimony at the trial showed TCW officials paid Mr. Gundlach under the terms of the new contract until he was terminated.
Also Thursday, Philip Barach, president of DoubleLine, testified that the plan to create the firm only started at a meeting at Mr. Gundlach's house in Santa Monica on Dec. 5, 2009, a day after Mr. Gundlach was relieved of his duties at TCW. Mr. Barach said there was “no grand plan” for a new asset management firm and a decision was only reached that afternoon to start DoubleLine. Mr. Barach said he agreed to contribute $5 million toward DoubleLine and received a 25% stake in the company.