Tim Boyle/Bloomberg NewsJeffrey Gundlach
Jeffrey Gundlach, a prominent bond fund manager, testified on Monday that he began making backup plans in case he was fired by his employer, the Trust Company of the West.
In a civil trial pitting Mr. Gundlach against TCW, as the company is better known, he testified that he had been in talks to move part of TCW’s fixed-income division to the Western Asset Management Company, also known as Wamco, before he was fired by TCW in December 2009. The discussions about hiring Mr. Gundlach were known as “Project Artwork” within Wamco, and Mr. Gundlach’s team was known as “Gallery,” a nod to his appreciation for fine art.
Mr. Gundlach said that he was making plans to leave TCW only because he thought its parent company, the French bank Société Générale, was preparing to sell the firm.
“I thought this was an extremely dangerous development, and I was scared,” Mr. Gundlach said, according to a live feed of the trial in a Los Angeles court that was shown on CourtroomView.
TCW is suing Mr. Gundlach and three other former employees for more than $375 million in damages, accusing them of stealing trade secrets and conspiring to set up a rival firm, DoubleLine Capital. Mr. Gundlach is seeking more than $500 million in a countersuit contending that TCW fired him to keep his lucrative fees from his fixed-income funds.
In his second day of testimony, Mr. Gundlach also said that he offered to buy a 51 percent stake in TCW in September 2009 for $350 million. In e-mails from that month that were shown to the jury, he told a colleague, Barbara VanEvery, that he felt “forever vulnerable” at TCW, where he had worked since 1985.
“Eliminating that vulnerability is the goal now,” he wrote, adding that he had come to this realization during a yoga class.
On Monday, lawyers for TCW sought to show that Mr. Gundlach, who has referred to himself as “the pope” and “the godfather,” was plotting to start his own firm long before he was fired. The seven men and five women on the jury were shown e-mails between Mr. Gundlach and his lieutenant, Philip Barach, in which Mr. Gundlach accused Marc I. Stern, TCW’s chief executive, of trying to drive a wedge between the two men.
“You deserve better. I deserve better. We deserve better. It’s really an easy decision now,” Mr. Gundlach wrote.
“I agree,” Mr. Barach replied. “But at least now we have the luxury of time to plan and prepare.”
When asked about the e-mails, Mr. Gundlach said that he was only referring to the decision to begin making contingency plans.
In Monday’s testimony, Mr. Gundlach also spoke about a trip he arranged to Marfa, Tex., in the western part of the state, for members of his fixed-income team at TCW.
Lawyers for TCW have argued that Mr. Gundlach used this trip to continue planning his departure from the firm.
Jurors were shown e-mails sent by Mr. Gundlach in which he instructed a co-worker to pick up gourmet cheese and sausage for the trip, including a type of gourmet cheese that was made using “2 different milkings.”
Mr. Gundlach said that the Marfa trip was unrelated to any sort of TCW business.
During cross-examination by his lawyer, Mr. Gundlach gave the jury an overview of the mutual fund industry, and spoke about the process of setting up DoubleLine in December 2009, including a partnership he formed with Oaktree Capital Management.
When asked about one of the claims made by TCW, that computerized systems used at DoubleLine to analyze mortgage-backed securities were copied from similar systems at TCW, Mr. Gundlach said the software was like Ernest Hemingway’s novel “The Sun Also Rises” in that once it was written, it would be easily recreated by the author.
He also dismissed claims that the trading systems were central to his investing process.
“I didn’t even have them installed on my workstation,” he said.
Mr. Gundlach’s testimony will continue on Tuesday.
Article source: http://feeds.nytimes.com/click.phdo?i=169e8ef8db145adff7c7259bc5786f3c
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