Eugene Grygo, Chief Content Editor, FTF News
“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, a cabal of Pacific Investment Management Company (PIMCO) managing directors plotted to drive founder Bill Gross out of PIMCO in order to take, without compensation, Gross’s percentage ownership in the profitability of PIMCO. Their improper, dishonest, and unethical behavior must now be exposed.”
Thus begins an epic lawsuit filed Oct. 8 by Gross and his lawyers with the Superior Court of the State of California via Orange County. As lawsuits go, this one is a page-turner with lots of twists and turns and billions at stake — it would make an excellent series for cable television or the Web.
However, this is the real world and a PIMCO spokesperson has issued the following statement about the legal action: “This lawsuit has no merit and our legal team will be responding in court in due course. Our focus remains on our clients and their investment portfolios.”
So, there’s a strong chance that a major court drama may be underway — just when you thought it was said and done.
As you may recall, a year ago Gross shocked everyone when he left PIMCO, the company he co-founded, and joined Janus Capital Group. While there were hints of a major controversy or two, the veil of corporate-speak quickly came down and investors and press were told that everything was hunky dory after all. Please go away with your unpleasant questions, especially about clients withdrawing billions from PIMCO.
But now Gross has no intention of going gently into that good night.
His legal action against PIMCO and its parent Allianz Asset Management alleges that his employment was wrongly terminated and that there were breaches of contract and the covenant of good faith and fair dealing. He also wants a jury trial.
In particular, Gross’s lawyers say that he was “entitled to receive 20% of the entire profit sharing bonus pool each year,” but that
Bill Gross, lead portfolio manager, Janus Capital
“co-conspirators” ultimately cheated him out of an $80 million bonus for the third quarter of last year. To underscore his point, the lawyers cite 2013 when “the profit sharing bonus pool totaled $1.3 billion and Mr. Gross received $300 million over the course of that year.” But Gross says that he is owed more than $80 million.
“As a direct and proximate result of defendants’ breach, plaintiff has been damaged in an amount to be determined at trial, but in no event less than $200 million,” according to the lawsuit.
There are too many juicy chapters and subplots to cover in this posting — you’re better off perusing the 37-page PDF yourself to get insights into the intrigue of a large, successful firm.
My main concern is about the timing of this lawsuit. Why now and not when he was exiting PIMCO? Also, what really sparked this major action? I doubt that it’s about money — Gross’s lawyers told The Wall Street Journal that any proceeds from a legal victory will be given to the PIMCO Foundation and other charities.
It could be simply that literally and figuratively Gross wants his day in court to tell his side of the story.
My gut instincts tell me, though, that there will be another shoe or two to drop if this case goes to trial.
I can’t wait for the next episode.
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