February 26, 2021

DealBook: In Court, Gundlach Chief Denies Using Trade Secrets

Jeffrey Gundlach of DoubleLine Capital testified in a Los Angeles court on Thursday.Pool photo by CVNJeffrey Gundlach of DoubleLine Capital testified in a Los Angeles court.

LOS ANGELES — In a courtroom here, Jeffrey E. Gundlach, one of the most prominent bond managers in the country, on Thursday defended himself against claims that he had planned to sabotage his former employer, Trust Company of the West, by using stolen data and client information to start a competing firm.

“I took my responsibility at TCW very seriously, “ he testified. “I loved TCW.”

The trial involving Mr. Gundlach and TCW, as Trust Company of the West is better known, resembled a breakup tale as Mr. Gundlach detailed his falling out with TCW, which fired him in December 2009. Soon afterward, TCW sued Mr. Gundlach, accusing him of breaching his fiduciary duty and stealing trade secrets to start his new firm, DoubleLine Capital. TCW is seeking more than $375 million in damages.

On the witness stand, Mr. Gundlach, dressed in a gray pinstripe suit and a blue tie, told the jury of seven men and five women that although he and his colleagues had once made preparations to leave TCW, including looking at office space and registering a Delaware corporation, he had “mothballed” those plans by the time he was fired in December 2009.

When a TCW lawyer asked him about a DoubleLine logo he helped design as early as July 2008, he played it down as a “doodle.”

“I’m very interested in the artwork of Piet Mondrian,” Mr. Gundlach said. “I was wondering if I could make a convincing Mondrian.”

So far, TCW’s case against Mr. Gundlach has hinged on testimony that he and his lieutenants took confidential and proprietary data for use at the new firm. Also named as co-defendants in TCW’s lawsuit are former employees Cris Santa Ana, Barbara VanEvery and Jeffrey Mayberry, all of whom currently work at DoubleLine.

All three have all testified that they downloaded TCW information to external hard drives, but have said that none of the data was used at DoubleLine. Mr. Santa Ana has testified that Mr. Gundlach told him to download information, a claim Mr. Gundlach disputed on Thursday. After Mr. Gundlach was fired in December 2009, more than 40 of his TCW team members followed him to DoubleLine.

“Anything that was downloaded, we never used at DoubleLine,” Mr. Gundlach said in a taped deposition that was played for the jury.

The trial is notable for occurring at all. Most financial employment disputes are settled quietly, but Mr. Gundlach said in an interview this week that the settlement offers he received from TCW were “worse than losing in court.”

In a countersuit, Mr. Gundlach is seeking more than $500 million, claiming that he was a victim of a conspiracy to oust him from the firm.

For a case involving the sleepy mutual fund world, the testimony has at times been shockingly personal. So far, witnesses called by TCW have testified that Mr. Gundlach was “a cultural cancer” who referred to himself as “the Pope” and “the Godfather.”

In an interview this week, Mr. Gundlach said he did not expect his aggressive personality to be a factor in the trial.

“The fact that they don’t like me doesn’t mean I’ve breached my fiduciary duty,” he said.

Earlier in the day, Richard Villa, TCW’s chief financial officer, told the jury that Mr. Gundlach had been paid more than $40 million in 2009, the year he was fired, and that he had had earned compensation totaling about $240 million for the years from 1991 to 2009.

A rare moment of levity occurred during the court session when, in his taped deposition, Mr. Gundlach was asked by John B. Quinn, a lawyer for TCW, if he knew of any data at TCW, other than a portable alpha trading system, considered proprietary.

After a long pause, Mr. Gundlach responded, “A recipe in the dining room?”

Mr. Gundlach will continue his testimony on Monday.

Article source: http://feeds.nytimes.com/click.phdo?i=ac576ccefb9b3d8edaaecb5ce622d18e

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