October 28, 2021

DealBook: Gundlach Says 2009 Firing Had Roots In 2001

Jeffrey Gundlach, chief of DoubleLine.Jessica Rinaldi/ReutersJeffrey Gundlach, chief executive of DoubleLine.

The bond fund manager Jeffrey E. Gundlach’s clash with his former employer, Trust Company of the West, began as early as 2001 and intensified in the months leading up to his firing, he testified on Tuesday.

In his third day of testimony in his trial against TCW, as Trust Company of the West is better known, Mr. Gundlach said he had clashed with TCW executives years before he was fired in December 2009. TCW is suing Mr. Gundlach and seeking more than $375 million in damages, contending that he used trade secrets and proprietary information from the firm to set up his new company, DoubleLine Capital.

Mr. Gundlach said he began questioning his future at TCW when its parent company, the French bank Société Générale, announced in January 2009 that it was combining its asset-management businesses with those of Crédit Agricole, another French bank, and that it was planning to list TCW on a stock exchange within five years.

Several months before that announcement, Frédéric Oudéa, the chief executive of Société Générale, told a group of TCW portfolio managers that “the asset-management business, I don’t know if I want to be in it,” according to Mr. Gundlach, who adopted a broad French accent while recounting the September 2008 meeting.

But despite his certainty that TCW would be sold, Mr. Gundlach maintained that he had never wanted to leave the firm.

“It would make no sense whatsoever for me, or my team, or my clients, or anyone,” he said, according to a live feed of the Los Angeles court proceedings provided through CourtroomView.

Mr. Gundlach is seeking more than $500 million in a countersuit asserting that he is owed fees from the fixed-income funds he ran at TCW.

On Tuesday, under questioning from his own lawyer, Mr. Gundlach gave a brief overview of his life. He told jurors about his “lower middle-class” upbringing in Buffalo and his decision to enroll at Dartmouth, where he graduated with highest honors in 1981. After graduating, he said, he briefly enrolled in a Ph.D. program in mathematics at Yale but dropped out and moved to California to play drums with his rock band.

After giving up his dreams of music stardom, Mr. Gundlach decided to become an investment banker, inspired by an episode of “Lifestyles of the Rich and Famous” that listed it as a top-paying job. He looked through the Yellow Pages for investment banks, but found only asset-management firms and stumbled into a job interview at TCW, where he began working in 1985.

In his testimony on Tuesday, Mr. Gundlach said that his problems with TCW began in 2001, when the firm was acquired by Société Générale. Mr. Gundlach’s equity stake in TCW was reduced, he said, asserting that this was something that Marc I. Stern, the firm’s chief executive, had promised would never happened.

“I’ve never yelled so much in my life,” Mr. Gundlach said of the incident.

On Tuesday, even while explaining his business conflicts, Mr. Gundlach’s aggressive personality was restrained considerably. He explained that he did not truly think of himself as “the pope,” as has been widely reported, but insisted instead that the nickname was “a third-party term meant as shorthand” within his fixed-income team.

Mr. Gundlach also responded to claims that he had used proprietary data from TCW at DoubleLine, saying he told employees repeatedly that any data taken from TCW should be removed and threatened “serious disciplinary measures, up to and including termination” for those who did not comply.

When Mr. Gundlach was fired, more than 40 of his TCW colleagues went to work for him at DoubleLine.

Earlier in the trial, Cris Santa Ana III, a current DoubleLine employee and one of Mr. Gundlach’s co-defendants in the suit, testified that Mr. Gundlach had told him to begin backing up information in case he was fired from TCW.

Mr. Gundlach will resume his testimony on Wednesday.

Article source: http://feeds.nytimes.com/click.phdo?i=fa77564b5e511b7687e35b450efca2d5

I.M.F. Talks in Greek Crisis at Key Juncture

After last year’s rescue of Greece, I.M.F. and European officials have now, for the most part, accepted that Greece will require another 60 billion euros in aid in order to see it through 2012 and 2013.

Dominique Strauss-Kahn, the I.M.F. managing director, who was taken off an airplane destined for Paris and charged with attempted rape, had been reportedly due to meet on Sunday with the German chancellor, Angela Merkel, and to attend meetings in Brussels on Monday with European finance ministers ostensibly to discuss Portugal’s economic crisis.

With the interest rates on Greek bonds continuing to soar, pressure has been building on Europe and Greece to announce a new program within the next week or so.

As of early Sunday, the I.M.F. board had yet to meet, and board members were still digesting the shock of Saturday’s news. One board member who spoke on the condition of anonymity said that it was way too early to consider who might succeed Mr. Strauss-Kahn, if he were to resign. He added that for the time being, the fund’s business would be run as it always is when the managing director is out of town — by its No. 2 executive, John Lipsky, a former U.S. Treasury executive and onetime banker at JP Morgan who has been overseeing the logistics of the Greek program. As first deputy managing director, Mr. Lipsky might assume Mr. Strauss-Kahn’s responsibilities during the criminal investigation.

But the Washington rumor mill has already begun to churn out names of candidates from non-European countries, including Kemal Dervis, a senior official at the Brookings Institute and a former Turkish finance minister, and Mohamed A. El-Erian, the chief executive office of PIMCO, the bond fund giant. 

For the past week, the I.M.F.’s senior executive in charge of Greece, Poul M. Thomsen has been meeting, along with executives from the European Union and the European Central bank, with government officials in Greece. The fund also has two technical experts who have been working for the past year within the Greek finance ministry.

But any cooperation has been spotty at best, say people briefed on the situation, as Greek bureaucrats tend to view the I.M.F. as “spies” working for Brussels and Washington. Some of those briefed on the discussions described them as “tense” and “edgy.”

The Greek public has also been looking with more disdain toward Prime Minister George Papandreou and his association with the I.M.F. Reports in Greek newspapers that Mr. Papandreou and Mr. Strauss-Kahn had engaged in private discussion months before the 110 billion euro rescue last year have just added to the view that I.M.F. technocrats are responsible for Greece’s economic problems.

Fund experts, meanwhile, are frustrated that Greek politicians are delaying key reforms such as more privatization, cuts in public sector employment and more flexibility for private sector employers to hire and fire workers. The Greeks contend that they can do only so much and that to push any faster on austerity measures would make the recession even worse. 

Nevertheless, it is also true that many Greeks also understand that radical changes must be undertaken and that while Europe’s and the I.M.F.’s demands are painful, Greece has little choice.

“This could not come at a worse time,” said Yannis Stournaras, an economist and head of an economic consulting group in Athens. “It affects the image of the I.M.F. — but most Greeks still believe that without the I.M.F. and Europe, Greece would be doomed.”

People familiar with the I.M.F.’s internal workings say that while Mr. Strauss-Kahn has been the public voice from the fund on Greece, internally it has been Mr. Lipsky. But Mr. Lipsky’s term is up in August, and pressure will be on the fund’s board to find a replacement.  Mr. Devis and Mr. El-Erian were again considered possible successors.

Article source: http://feeds.nytimes.com/click.phdo?i=9d62da283d6b074d613891a4fbab090d