TCW accuses Gundlach of secret plot to steal 'entire business'

TCW Group Inc.'s former investment chief Jeffrey Gundlach plotted with colleagues to steal the company's trade secrets before he was fired and started a rival money-management firm, a lawyer for TCW told a jury. “They tried to steal an entire business from TCW worth hundreds of millions of dollars,” TCW lawyer John Quinn said in his opening statement today at a state court trial in Los Angeles. “They secretly plotted to leave en masse.” TCW, the Los Angeles-based unit of Societe Generale SA, sued Gundlach, 51, and three other ex-employees in January 2010, a month after he was fired and more than half of TCW's fixed- income professionals had joined his firm, DoubleLine Capital LP. TCW seeks $375 million in damages, claiming Gundlach stole its trade secrets as he plotted to start his own business. Gundlach, who had worked at TCW for 25 years and who was named Morningstar's Fixed Income Manager of the Year in 2006, said in a cross complaint that TCW fired him to avoid having to pay as much as $1.25 billion in future management and performance fees for the funds his group managed. Gundlach has since reduced his damages estimate to about $500 million. DoubleLine's lawyer, Brad Brian, is scheduled to give his opening statement later today. The trial may have undesirable consequences for both sides, said Geoff Bobroff, an independent fund consultant in East Greenwich, Rhode Island. Gundlach, who has attracted $13 billion in assets since his firm opened, may see damage to his reputation, while TCW Group risks the disclosure of its inner workings and details such as fees. “The monetary piece of the trial is less important than the exposure involved,” Bobroff said in an interview. “Clearly, TCW wouldn't like to have the dynamics of their company and workings on display.” TCW said in its complaint that Gundlach was only able to start his new firm within weeks after he was fired because he and the other three former employees had secretly been taking steps to set up DoubleLine in September and October of 2009, while they were still at TCW. The case is Trust Co. of the West v. Gundlach, BC429385, California Superior Court, Los Angeles County. Bloomberg