DoubleLine’s Gundlach fires back at TCW over criminal probe
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
L.A. money manager TCW Group and its former chief investment officer, Jeffrey Gundlach, traded new volleys Wednesday in an escalating war of words over their legal battle.
Gundlach, who was fired by TCW a year ago and quickly set up a rival firm, late Wednesday issued a statement accusing TCW of “blatantly mischaracterizing the facts” regarding a Justice Department investigation into their bitter breakup.
The Times on Tuesday reported that mutual funds managed by Gundlach’s year-old company, DoubleLine Capital, disclosed in a new regulatory filing that some employees and former employees of DoubleLine have been interviewed by the office of the U.S. attorney in Manhattan.
Also on Tuesday, TCW told The Times that it had received a federal criminal grand jury subpoena “with regard to the investigation of DoubleLine and its principals for trade-secret theft” from TCW.
Within weeks after his ouster Gundlach formed DoubleLine, and most of his bond investment team at TCW quickly defected to join him. In January TCW sued Gundlach, alleging that he and his team engaged in “wholesale theft of vast quantities of TCW proprietary information” before they left and used that information to set up DoubleLine.
Gundlach, who was a star bond-fund manager at TCW, has denied the charges and has countersued. The case is scheduled to go to trial in July in L.A. Superior Court.
As for the government’s interest, the Justice Department hasn’t disclosed what it’s looking at on behalf of the grand jury. TCW, however, told The Times that the firm “has been informed that it is the victim in this particular matter.”
The Justice Department has taken more interest recently in trade-secret theft. The department in February formed a task force on intellectual property, and currently is prosecuting a case involving alleged theft of computer code from Goldman Sachs Group by a former programmer.
In his statement, Gundlach derided TCW’s allegations that he or his team stole TCW trade secrets, and challenged the company to ‘publicly identify a single alleged ‘trade secret’ that DoubleLine is using.’
As for DoubleLine’s allegation that TCW this week had mischaracterized the facts of the government’s probe, a DoubleLine spokesman declined to specify which TCW statements it was referring to. The firm ‘has decided not to comment on this issue beyond the content of the statement,’ the spokesman said.
But as he has done previously, Gundlach in the statement raised the issue of a $500-million investment fund TCW was setting up in the fall of 2009 under the U.S. Treasury’s Public-Private Investment Program. Gundlach was supposed to manage the fund, but TCW opted to liquidate the portfolio after terminating Gundlach.
‘DoubleLine has presented extensive evidence showing that, while TCW management was using the reputation and performance of Mr. Gundlach and his team to lure the government into awarding TCW the PPIP mandate . . . TCW was also secretly planning to terminate Mr. Gundlach,’ DoubleLine said. ‘TCW wasted months of the government’s time and effort by failing to disclose their longstanding plans to terminate Mr. Gundlach.’
Responding to Gundlach’s statement, TCW issued its own late Wednesday, saying that ‘any suggestion that the [government’s] investigation relates to TCW’s withdrawal from the PPIP program is not only false and misleading, but designed to divert attention from the actual focus of the investigation -- namely, theft of proprietary information from TCW by key DoubleLine principals.’
-- Tom Petruno