Inside Bill Gross’ Lawsuit

On Thursday, Bill Gross sued the company he co-founded in 1971 for wrongful termination, seeking at least $200 million in damages.

The 37-page complaint filed in the California Superior Court in Orange County detailed Gross’ account of his final days at PIMCO, and the departure of one-time CEO and co-CIO Mohamed El-Erian. 

His story: PIMCO’s “cabal” of executives plotted to push Gross out, “driven by a lust for power, greed, and a desire to improve their own financial position and reputation at the expense of investors and decency.”

Tensions started with Gross’ derailed succession plan to leave leadership of PIMCO to El-Erian. 

According to the lawsuit, El-Erian tried to bring new asset classes and “high risk” derivatives to the traditional bond shop, transforming it into a “general-purpose investment management firm.” PIMCO’s offerings have indeed expanded in recent years to include equities, real estate, and multi-asset funds. “As time passed, Mr. Gross characterized El-Erian’s plans as similar to the extensive and varied menu at a Cheesecake Factory restaurant, while his own favored approach was ‘bonds and burgers’—a simple, laser focus on a specific type of securities that had been successful since PIMCO’s founding and provided stable returns for investors,” the complaint said.

Despite philosophical differences between the two, the lawsuit said Gross moved forward with the succession plan, even offering to step down from a spot on PIMCO’s investment committee “in favor of El-Erian.”

El-Erian, however, “was angry and apprehensive at the idea that he would have to bear sole responsibility (and blame) for the high-risk, high-fee investments he had expanded PIMCO into,” the suit said. 

Soon after, El-Erian left PIMCO.

The lawsuit also claimed that El-Erian and a number of PIMCO executives then smeared Gross’ reputation following the fall-out with leaks of “discussions that were now appearing in the press in heavily altered forms designed to harm Mr. Gross.”

“Glossed over—or even left entirely unmentioned—was any comment on El-Erian’s abrupt departure from a company that he had been hired to eventually lead, or of El-Erian’s abysmal performance on managing his PIMCO fund,” the complaint said. 

Following an internal investigation led by CEO Doug Hodge and President Jay Jacobs, Managing Director Andrew Balls allegedly admitted to speaking to reporters “on behalf of El-Erian” about the circumstances of his resignation, despite instructions to staff not to speak to reporters.

The lawsuit also detailed how now-Group CIO Dan Ivascyn “hatched a plan to oust Mr. Gross from PIMCO,” along with the “similarly money-driven Brent Harris” who led PIMCO’s mutual fund complex. Harris allegedly raised fees on some funds, including Gross’ Total Return Fund, “through creatively labeling such fees as ‘administrative costs.’”

Ivascyn, Harris, and other conspirators threatened to quit “if Mr Gross was not driven from the company,” the complaint said.

Backed into a corner, Gross even offered to resign as CIO, chair of the investment committee, and member of the executive committee and stop managing the PIMCO flagship fund, according to the suit. He further agreed to be “barred from the PIMCO offices.”

However, the complaint said Hodge and other senior staff (including parent company Allianz) pushed for Gross’ termination. The co-founder announced his resignation on September 26, 2014, joining Janus Capital a few days later.

PIMCO also allegedly denied Gross his third quarter bonus payment of nearly $80 million. The former CIO was entitled to a 20% share of the company’s $1.3 billion bonus pool, the lawsuit stated.

Allianz’s spokesperson said the firm would not comment “other than that the lawsuit has no merit.” She added that “from a factual perspective,” Gross “immediately moved to a competitor” upon leaving PIMCO.

PIMCO also declined to comment on the allegations.

The Total Return Fund’s assets dipped below $100 billion for the first time in eight years last month, following more than two years’ worth of consecutive monthly outflows dating from before Gross’ departure. It peaked at $293 billion in April 2013.

Related: Bill Gross Sues PIMCO for $200M, Fade to Black, Bill Gross Quits PIMCO to Join Janus