* TCW sues former CIO Gundlach and his new firm
* TCW seeks at least $200 mln damages, other remedies
* Gundlach's new firm says allegations are meritless
* Lawsuit claims pornography found in Gundlach's office
* Cites containers and bags, some labeled marijuana
(Adds Gundlach comment)
By Aaron Pressman
BOSTON, Jan 7 Trust Company of the West sued
its former chief investment officer, Jeffrey Gundlach, accusing
him of stealing confidential data, lying to potential clients
and keeping drugs and pornographic materials in his office.
TCW, the U.S. asset management unit of French bank Societe
Generale (SOGN.PA), said in its lawsuit filed on Thursday that
the award-winning bond fund manager had misappropriated trade
secrets, interfered with the firm's contractual relationships
with clients and committed civil conspiracy among other
Drugs and pornographic materials, discovered in Gundlach's
office after he was fired, violated the firm's employment
regulations, the lawsuit said.
The firm said in the lawsuit that an examination of
Gundlach's office on Dec. 4, the day he was fired, revealed
"plastic containers and bags containing green leafy substances
and seeds, some explicitly labeled marijuana, as well as three
tin foil tubes, the ends of two of which were burnt."
According to the lawsuit, the office also contained dozens
of pornographic magazines and videos.
TCW said in the lawsuit that Gundlach was fired for
threatening to take actions that would have jeopardized the
firm's ability to manage clients' fixed income assets.
Gundlach, who joined TCW in 1985, said in a telephone
interview Thursday evening, "I am not distracted by frivolous,
pointless, irrelevant and untrue allegations from the TCW
lawsuit. Any significant allegations will be proven to be
untrue through a legal process."
A statement earlier in the day from DoubleLine Capital LP,
the firm Gundlach opened days after being fired, said the
lawsuit's allegations were without merit.
"The false and hyperbolic personal attacks by TCW are
obviously a gratuitous and irrelevant gutter tactic, which
merely underscores the weakness of TCW's claims," DoubleLine
said in the statement.
The lawsuit is the latest move in a battle for customers
between TCW and its one-time star manager, who has hired away
more than 40 of his former colleagues. Since Gundlach's
departure, TCW clients have withdrawn billions of dollars from
the Los Angeles-based firm's bond funds.
"Given the circumstances, this was always in the cards,"
said Aaron Dorr, managing director at Jefferies & Co, who works
on fund company mergers and acquisitions. "Asset management
businesses are people driven. It always makes for interesting
battles when people decamp."
Gundlach, who was named Morningstar's bond fund manager of
the year in 2006, oversaw about $65 billion of TCW's $110
billion of assets before he was fired.
At the same time Gundlach was fired, TCW announced it had
purchased cross-town rival Metropolitan West Asset Management
LLC, which won Morningstar's top honor in 2005. The fixed
income firm, led by Tad Rivelle, managed about $30 billion.
The 39-page complaint filed on Thursday in California
Superior Court in Los Angeles also named Gundlach's new firm,
DoubleLine, and three other former TCW employees who joined
Gundlach as defendants.
"GREEN LEAFY SUBSTANCES"
The lawsuit seeks unspecified monetary damages, ownership
rights of Gundlach's new firm and other remedies. TCW said the
"measurable" harm it had suffered already exceeded $200 million
in addition to uncalculated "intangible" losses.
In the complaint, TCW said it found evidence that several
of Gundlach's colleagues who joined him at DoubleLine had spent
weeks downloading investment positions, analytical software and
proprietary information about clients to portable computer
ABLE GRAPE LLC
Gundlach and other colleagues confronted TCW Chief
Executive Marc Stern and threatened to quit the firm at a Sept.
3 meeting, according to the lawsuit. After the meeting they
"feigned satisfaction" while "secretly plotting their
departures," TCW said in the lawsuit.
The alleged planning included seeking to lease 24,000
square feet of office space, copying 9 million pages worth of
information from TCW computers and registering a corporation in
Delaware under the name "Able Grape LLC," according to the
lawsuit. The corporation's name was changed to DoubleLine four
days after Gundlach was fired.
Gundlach's possible departure from TCW was the subject of
speculation throughout 2009, as Societe Generale considered
reducing its stake in the firm through an initial public
offering or private-equity deal.
Gundlach has said he offered in September to buy the firm
from the French bank. But a SocGen spokesman has said the bank
never received a serious or formal offer from Gundlach.
(Reporting by Aaron Pressman and Svea Herbst; Additional
reporting by Jennifer Ablan; Editing by Leslie Gevirtz, Phil