Bill Gross sued his former employer, Pacific Investment
Management Co., and its parent company on Thursday for breach of contract,
alleging that managing directors plotted to drive the famed bond investor out
of the firm because of “power, greed, and a desire to improve their own
financial position,” according to court documents. Mr. Gross, a co-founder of
Newport Beach, Calif.-based Pimco and the firm’s former chief investment
officer, abruptly left the company in September 2014 after a year of heavy
outflows from his flagship bond fund and disagreements with the firm’s other
executives, The Wall Street Journal reported at the time.
The lawsuit alleges that by forcing Mr. Gross out, younger
executives would be able to split his share of the firm’s well-known bonus
pool. For Mr. Gross, that amounted to about $16 million in the first two
quarters of 2014, with $80 million more expected later in the year, according
to the suit. Mr. Gross alleges that Pimco has refused to pay him his
third-quarter bonus of $80 million, despite his leaving just days before the
end of the third quarter of 2014.
Mr. Gross, a billionaire, is demanding a jury trial and
damages of no less than $200 million, according to the 19-page complaint, filed
in the Superior Court of the state of California for the county of Orange. The
suit also names Allianz Asset Management of America, a unit of
Pimco’s German-based parent company, Allianz SE.
The suit details for the first time Mr. Gross’s version of
the trouble between him and former Pimco Chief Executive Mohamed El-Erian,
who left the company in early 2014 after clashes with Mr. Gross,
according to court documents. Mr. El-Erian, still an adviser to Allianz,
disagreed on the direction of the firm, the suit alleges. Mr. El-Erian wanted
Pimco to shift away from its core focus on bonds and become a more
general-purpose investment-management firm that also offered stocks,
commodities and hedge-fund products to investors.
As a result of the differences, Mr. Gross says in the suit
that he offered to step back from Pimco’s investment committee in favor of Mr.
El-Erian. That move prompted Mr. El-Erian to abruptly announce his resignation,
according to the complaint.
The lawsuit also goes into the details leading up to Mr.
Gross’s departure from Pimco in September 2014, many of which have been
chronicled in a series of stories in the Journal.
Mr. Gross says in the suit that his relationship with Pimco
reached a breaking point when managing directors, including group chief
investment officer Daniel Ivascyn, threatened to resign if Mr. Gross
didn’t leave the company. Michael Diekmann, the former chief
executive of Allianz, flew to California to meet with Mr. Gross, according to
the complaint. The two worked out an agreement in which Mr. Gross would cease
managing the firm’s flagship Pimco Total Return Bond fund, and would be given a
portfolio of less than 10% of its assets under management at the time.
Instead, Mr. Gross alleges that Douglas Hodge, who
succeeded Mr. El-Erian as Pimco’s chief executive, and President Jay
Jacobstorpedoed the plan and outlined an entirely different role, saying that
if he didn’t accept he would be terminated immediately.
Mr. Gross says in the suit that his relationship with Pimco
reached a breaking point when managing directors, including group chief
investment officer Daniel Ivascyn, threatened to resign if Mr. Gross didn’t
leave the company
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