TCW CEO Says Firing Gundlach Amounted to 'Cutting off Your Right Arm'

(August 19, 2011) — The CEO of asset-management company Trust Company of the West (TCW) Mark Stern told a California Superior Court jury that he was forced to fire his his chief investment officer, Jeffrey Gundlach, in December 2009 over concerns that he was involved “in a secret plot” to steal clients and employees from the firm, Bloomberg reported.

While Stern said he did not wish to terminate Gundlach since he was such an important manager at the firm, managing 60% of its assets, he testified that he felt pressure to do so when he learned of the bond-fund star’s plans to leave TCW for Western Asset Management Co. or Pacific Investment Management Co.

Gundlach has been engaged in a lawsuit for allegedly stealing trade secrets from his former employer, TCW, and has testified that he did not need the company’s data to start his rival firm.

Gundlach, formerly the fixed-income guru at TCW, has been accused by the firm of stealing its system for evaluating bonds to set up a rival money-management business, DoubleLine Capital. However, under questioning by his own attorneys, he asserted that the TCW system for evaluating complex bonds used “the same data everyone else looked at,” the Los Angeles Times reported. Furthermore, he asserted that DoubleLine was built from scratch, with the computer software and data systems purchased from a third-party vendor.

Gundlach formed DoubleLine just 10 days after being fired in December 2009, with most of his bond-team members leaving TCW to join him. DoubleLine has attracted about $14 billion from investors in 20 months. While TCW — which seeks $375 million in damages — claims Gundlach stole its trade secrets, including client portfolio data, to start DoubleLine, Gundlach has countersued TCW and its parent firm, French bank Societe Generale. Seeking about $500 million, he accused the firm of firing him to avoid paying him a hefty chunk of promised income, and said that concerns over being fired drove him to develop a backup plan to start his own money management firm.