A Goldman Sachs mergers and acquisition executive on Monday testified that former TCW Chief Investment Officer Jeffrey Gundlach discussed with Goldman officials in November 2009 that he might leave TCW with no advance notice to form his own money management firm and that he had no contract with TCW.
The testimony of Todd Owens, a Goldman managing director who had been subpoenaed by TCW, had lawyers for Mr. Gundlach putting their client back on the witness stand to rebut Mr. Owens' claims.
Mr. Gundlach has insisted in testimony during the six-week trial in the case between him and TCW that any plans of his to leave the money manager would have been negotiated and TCW would have received a cut of the fees from any business he took from TCW.
TCW fired Mr. Gundlach in early December 2009 and later filed suit against him and his new firm, DoubleLine Capital, after TCW said it discovered a plan by him and key associates to steal trade secrets, millions of documents and data to help form Mr. Gundlach's new firm.
Mr. Gundlach, in previous testimony at the trial, said he never signed the five-year agreement TCW negotiated with him in May 2007, though testimony from TCW executives has shown that top officials at TCW agreed, verbally and in e-mails, that they had a deal with Mr. Gundlach.
Proving the existence of a valid contract is central to Mr. Gundlach's countersuit against TCW that he is owed around $500 million in incentive fees.
Mr. Owens said Mr. Gundlach had requested the Nov. 9, 2009, meeting with Goldman executives in New York but didn't say what the topic of the meeting would be. Goldman officials thought Mr. Gundlach wanted to discuss a mortgage REIT, Mr. Owens said. He and other Goldman executives were surprised when Mr. Gundlach disclosed at the meeting that he was thinking of leaving TCW and wanted their advice.
He said Mr. Gundlach discussed three options at the meeting: leaving TCW without notice to start his own firm; staying at TCW and working within the existing business there; and entering into a negotiated departure.
In a second meeting on Dec. 1, 2009, Mr. Owens testified, Goldman executives told Mr. Gundlach they could not work with him. Under questioning from TCW attorneys, Mr. Owens said they already did business with TCW and its parent, Societe Generale, and didn't want to risk losing future business. They also were concerned about ”relational risk” that could result from Mr. Gundlach's departure, said Mr. Owens.
Called back to the witness stand after Mr. Owens' testimony, Mr. Gundlach said he never told Goldman officials that he was planning to leave TCW without notice to start his own firm. Mr. Gundlach did confirm that he discussed staying at TCW or reaching a negotiated departure agreement with TCW.
Mr. Gundlach said he called for the meeting with Goldman officials because he wanted to know how to make the situation better at TCW. He said he spent a lot of time “griping” about TCW.
He said Goldman officials responded with three options: he could work on improving the company's corporate governance, engage in a management buyout of the company or negotiate his own departure.
Mr. Gundlach also insisted he never told Goldman officials that he didn't have a contract and said he told Goldman officials he did not have a non-compete agreement with TCW.
TCW's lawyers in cross-examination of Mr. Gundlach showed him the non-compete clause in his unsigned contract and in contracts he previously signed, and Mr. Gundlach said he was told by people at TCW that under California law, non-compete agreements were not valid.
“I thought it was illegal,” he said.
Closing arguments are scheduled for Tuesday morning.