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TCW vs. bond fund star Jeffrey Gundlach trial to begin

July 27, 2011 |  9:23 pm

Opening arguments were set to begin Thursday in the bitter court fight between L.A. money management giant TCW Group and its former chief investment officer, Jeffrey Gundlach.

The case, to be heard in Los Angeles County Superior Court, has each side seeking hundreds of millions of dollars in damages from the other, in an unusual airing of Wall Street dirty laundry.

Judge Carl J. West empaneled a jury on Wednesday. The civil trial is expected to last at least five weeks, and at least initially may be a media circus as TCW senior executives and Gundlach face each other for the first time since the company fired him in December 2009.

Gundlach Gundlach launched his own firm, DoubleLine Capital, 10 days after he was ousted by TCW. The star bond fund manager was quickly joined by most of his team members at TCW, and has attracted $13 billion from investors in just 19 months.

TCW, which manages about $120 billion, sued Gundlach in January 2010, alleging that he and key aides conspired to steal massive amounts of TCW proprietary information to set up DoubleLine.

Gundlach, 51, has denied TCW's allegations and has countersued. He accuses his former employer of firing him after 24 years at the firm to cheat him out of a huge chunk of promised income.

The trial brings two of L.A.'s premier law firms head to head: Quinn Emanuel Urquhart & Sullivan for TCW and Munger Tolles & Olson for Gundlach.

Gundlach, who has unabashedly referred to himself as “amazingly brilliant analytically,” has become a well-known figure on Wall Street because of his expertise investing in complex mortgage-backed bonds.

His stellar performance managing bond portfolios brought TCW tens of billions of dollars from institutional and individual investors from 2000 to 2009.

His hot hand has continued at DoubleLine: His flagship mutual fund, DoubleLine Total Return Bond, is up 5.9% year to date, beating 96% of its peer bond funds, according to Bloomberg News data.

Marcstern Gundlach and his attorneys have repeatedly accused TCW of engineering a public smear campaign against him. When TCW filed suit against him in 2010, it included allegations that hard-core pornographic magazines and DVDs, and drug paraphernalia, were found in his TCW offices downtown and in Santa Monica.

Gundlach said at the time that TCW, led by 66-year-old CEO Marc Stern, was resorting to "gutter tactics." Later, he said that whatever the company found in his offices were "vestiges of closed chapters of my life."

TCW wanted to have the jury hear about the alleged porn and drugs, but Judge West ruled last week that those accusations weren’t relevant to the case, which he said already was complex enough.

The judge also has complained that the attorneys have buried him in paperwork as they have sought to refine portions of their cases ahead of the trial.

“This is going to end sooner than later,” West said of the legal fight at a hearing on July 21. “It needs to end. And it needs a trial or whatever it takes to make it end.”

-- Tom Petruno


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Top photo: DoubleLine Capital CEO Jeffrey Gundlach. Credit: Jessicas Rinaldi / Reuters

Bottom photo: TCW Group CEO Marc Stern. Credit: Los Angeles Times