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Bill Gross Sues PIMCO "Cabal" Over Ouster, Seeks "Hundreds Of Millions", Blames El-Erian - Full Complaint

Tyler Durden's picture




 

When Bill Gross exited PIMCO last October, it came as somewhat of a shock despite the fact that the outspoken “King” of the bond market had a reputation for being incorrigible and somewhat difficult to get along with in the boardroom. 

Now, Gross is set to sue the asset management firm he put on the map for "hundreds of millions" in connection with what he says was a “plot” by an evil, internal “cabal” to facilitate his ouster. Here are the bullet points:

  • BILL GROSS SUES PIMCO FOR AT LEAST $200M: CNBC
  • GROSS TO CLAIM HE IS OWED AT LEAST $200 MILLION DAMAGES
  • GROSS TO CLAIM PIMCO EXECS CONSPIRED TO GET HIS PROFITS
  • GROSS TO SUE PIMCO FOR `HUNDREDS OF MILLIONS' OVER OUSTER

And here's Bloomberg's first take:

Bill Gross sued Pacific Investment Management Co. and parent Allianz SE for “hundreds of millions of dollars,” claiming he was wrongfully pushed out as the bond giant’s chief investment officer by a “cabal” of executives seeking a bigger slice of the bonus pool.

 

“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 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,” according to the complaint, which Gross’s lawyers said was filed Thursday in California state court in Santa Ana. “Their improper, dishonest, and unethical behavior must now be exposed.”

 

A draft of the complaint was obtained by Bloomberg. The filing couldn’t be immediately confirmed in court records.

 

The lawsuit presents a detailed account of the events leading up to Gross’s departure on Sept. 26 last year, a move that rattled bond markets and promptedrecord redemptions at what once was the world’s largest mutual fund. It portrays Gross as an advocate for lower fees and traditional, lower-risk bond investments who was pushed out gradually by other executives seeking to expand into riskier assets and higher-fee products.

 

Gross, 71, claims the Newport Beach, California-based firm owes him at least "hundreds of millions" for wrongful termination, breach of written contract, and breach of covenant of good faith and fair dealing, according to the document.

 

Gross was expecting a bonus of about $250 million for 2014, with most of that due in the second half of the year, according to the lawsuit. Because he left the firm days before the third quarter ended, Pimco refused to pay him a proportionate amount, said the complaint, which claims that his termination resulted in damages to Gross of no less than $200 million.

And here's DealBook with some further color: 

The man known as the bond king, William H. Gross, is suing the company that he built into one of the largest asset managers in the world, providing his own colorful version of an ugly feud that led to his departure last year.

 

The lawsuit, filed on Thursday, represents a bold effort by Mr. Gross to repair the damage that was done to his reputation in the year before and after he was fired from Pimco.

 

News media reports have portrayed Mr. Gross’s departure as a product of his erratic and domineering behavior at the firm he helped found in 1971.

 

Mr. Gross is seeking “in no event less than $200 million” from Pimco for breach of covenant of good faith and fair dealing, among other causes of action. But to underscore the degree to which the suit is motivated by Mr. Gross’s desire to correct the public record, he has promised to donate any money he recovers to charity, his lawyer, Patricia L. Glaser, said.

 

Pimco did not immediately respond to calls for comment.

 

The lawsuit presents a picture of Pimco — an asset manager based in California that is responsible for billions of dollars in retirement savings — as a den of intrigue riven by back stabbing and competing egos.

 

The first sentence of the suit says that Mr. Gross was pushed out by a “cabal” of Pimco managing directors who were “driven by a lust for power, greed, and a desire to improve their own financial position.”

 

“Their improper, dishonest, and unethical behavior must now be exposed,” the opening paragraph concludes.

They say reality is often stranger than fiction and this lawsuit seems to support that contention. Apparently, Mohamed El-Erian was aiming to move PIMCO aggressively into the derivatives market, something Gross was opposed to. After El-Erian moved to parent Allianz, "leaks" blaming Gross for El-Erian's departure served to stir up trouble. The leaks, apparently, came from none other than the man who just last month said the Fed may find it impossible to escape from ZIRP: Mr. Andrew Balls. Via The Times, again:

The lawsuit locates the beginning of the problems in Mr. Gross’s decision to bring Mr. El-Erian to Pimco in 2007 to groom him as a potential successor. Mr. El-Erian was at Pimco previously, but in 2007 he was running Harvard University’s endowment.

 

When Mr. El-Erian returned, the suit says, he was eager to push Pimco beyond the bond funds that had traditionally been its strength and wanted to use “a host of high-risk derivative asset classes” he had learned about at Harvard. The suit says the returns on the funds that Mr. El-Erian ran at Pimco were “abysmal.”

 

According to the suit, Mr. Gross offered to step back from everything but his bond funds, but this scared Mr. El-Erian and led him to “abruptly” announce his resignation in early 2014.

 

At the time, Mr. El-Erian said he was stepping back to write another book and spend more time with his family.

 

Almost immediately after Mr. El-Erian’s departure, leaks to the news media attributed the blame for his departure to Mr. Gross.

 

An internal Pimco investigation determined that the leaks had come from Andrew Balls, a fast-rising star at Pimco who previously worked as a journalist at The Financial Times, the suit says. When Mr. Balls was confronted, the suit says, Mr. Balls initially denied that he was responsible but then, when shown the evidence, changed his story.

 

According to the suit, Mr. Gross pushed for Mr. Balls to be fired, but instead Pimco executives had him sign a document suggesting that he had only given out general information about Pimco and agreed that Mr. Balls would remain at Pimco. Mr. Balls is now one of five co-chief investment officers under Mr. Ivascyn.

So what allegedly happened here is that El-Erian was pushing hard to steer the ship into what Gross thought were dangerous, derivatives-laden waters and when the friction between the two led to El-Erian's "transition", the news got out, prompting Bill to squeeze PIMCO's Balls. 

We'll simply leave you with the following summary of what Gross thinks he "deserves":

Gross was expecting a bonus of about $250 million for 2014, with most of that due in the second half of the year, according to the lawsuit. Because he left the firm days before the third quarter ended, Pimco refused to pay him a proportionate amount, said the complaint, which claims that his termination resulted in damages to Gross of no less than $200 million.   

Full complaint below:

 

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Thu, 10/08/2015 - 11:17 | 6644370 I am a Man I am...
I am a Man I am Forty's picture

white billionaire man problems

Thu, 10/08/2015 - 11:22 | 6644397 junction
junction's picture

"Driven by a lust for power, greed..."  Doesn't that describe Bill Gross to a tee?  It seems he is suing them for behaving like Gross.

Thu, 10/08/2015 - 11:24 | 6644406 Fish Gone Bad
Fish Gone Bad's picture

Wow, it must suck to be Bill Gross...

Thu, 10/08/2015 - 11:29 | 6644420 TahoeBilly2012
TahoeBilly2012's picture

Gross looks like a kid who got beatup a lot in second grade

Thu, 10/08/2015 - 11:34 | 6644441 Bay of Pigs
Bay of Pigs's picture

How much money does that asshole need anyway?

Haha...PIMPCO.

Thu, 10/08/2015 - 11:55 | 6644559 MillionDollarBonus_
MillionDollarBonus_'s picture

In my opinon Bill Gross should be fined for his immeasurable damage to the global economy. Under the TPP, many multinational corporations could legitimately sue Bill Gross for the losses in sales that his pessism has cost them. Holding a position of influence in the financial world comes with a responsibility to uphold the global economy. Those who abuse their positions of influence should be punished accordingly.

Thu, 10/08/2015 - 12:17 | 6644655 Barry Mckokiner
Barry Mckokiner's picture

MDB, such a wonderful Troll you are. Kepp up the good work.

Thu, 10/08/2015 - 12:28 | 6644710 Booked
Booked's picture

Research the history of "the whipping boy".  Might be an apt description of Bill Gross.

 

Thu, 10/08/2015 - 11:23 | 6644399 Ignatius
Ignatius's picture

Nothing but sympathy here.

Thu, 10/08/2015 - 11:52 | 6644538 I am a Man I am...
I am a Man I am Forty's picture

Bill Gross reads "Durden", Bill Gross junked me

Thu, 10/08/2015 - 11:25 | 6644380 Jam
Jam's picture

The "Cabel" must have misplaced the nail gun.

Thu, 10/08/2015 - 11:38 | 6644463 At120
At120's picture

I find this totally Gross.

 

 

Thu, 10/08/2015 - 13:16 | 6645026 BurningFuld
BurningFuld's picture

And that other guy has some balls.

Thu, 10/08/2015 - 11:37 | 6644382 thepigman
thepigman's picture

old billionaire vs middle-aged millionaires fighting over a non-working bond market all fucked up by the bernank

and of course el-erian's funds performance was abysmal....who would expect more from an Egyptian Jets fan?

Thu, 10/08/2015 - 11:21 | 6644384 Kaiser Sousa
Kaiser Sousa's picture

“Driven by a lust for power, greed, and a desire to improve their own financial position and reputation"

not thats some funny shit....u know its close to the end when the rats start eating each other....

Thu, 10/08/2015 - 11:29 | 6644418 RopeADope
RopeADope's picture

And here I thought asset managers were all about improving the position of fluffy bunnies and cute kittens...

/s

Queue mass exodus from the Janus bond fund in 3..2..1..

Thu, 10/08/2015 - 12:12 | 6644468 KnuckleDragger-X
KnuckleDragger-X's picture

Cannibalism is an old a very old tradition that's getting ready to make a big comeback in the markets, Gross just wants a prime cut.....

Thu, 10/08/2015 - 11:21 | 6644386 Bryan
Bryan's picture

Don't you have enough money yet, Bill?

Thu, 10/08/2015 - 11:25 | 6644403 Dead Canary
Dead Canary's picture

How is he supposed to put food on the table?

Great. Now this is going to keep me up all night.

Thu, 10/08/2015 - 11:25 | 6644407 Yen Cross
Yen Cross's picture

   I pooped today.

 Can we please get these Fed. minutes overwith so I can short this lipstick covered pig of a market.

Thu, 10/08/2015 - 11:26 | 6644412 Bill of Rights
Bill of Rights's picture

He he  let the eating begin...

Thu, 10/08/2015 - 11:29 | 6644414 WillyGroper
WillyGroper's picture

Didn't El-Erian leave before Gross?

Gosh, life must be tough for those folks.

In other news Ruppert Murdoch wants a blacker prez.  Mugabe?

Thu, 10/08/2015 - 11:50 | 6644519 I am a Man I am...
I am a Man I am Forty's picture

El Erian never left Allianz, the parent company of Pimco.  

Thu, 10/08/2015 - 11:27 | 6644415 TheObsoleteMan
TheObsoleteMan's picture

It's not Pimco, it's Pimpco. They pimp worthless bonds.

Thu, 10/08/2015 - 11:31 | 6644428 Tachyon5321
Tachyon5321's picture

executives seeking a bigger slice of  Bonus Pool: This goes back to the old saying that hogs get slaughtered. 

Thu, 10/08/2015 - 11:35 | 6644447 paint it red ca...
paint it red call it hell's picture

Go get'em Bill...................

Thu, 10/08/2015 - 11:36 | 6644451 shanearthur
shanearthur's picture

So, my Firefox browser apparently auto updated to version 41.0.1 and all of a sudden this place turns into an ad bonanza. Anybody else having this problem. I've tried to go into the tools/ options and adjust settings, but to no avail. This place looks like a freakshow circus with all these ads.

Thu, 10/08/2015 - 11:56 | 6644564 Duc888
Duc888's picture

 

 

Shanearthur: So, my Firefox browser apparently auto updated to version 41.0.1 and all of a sudden this place turns into an ad bonanza.

 

Addblock plus

Noscript

Ghostery,  and for the fun of it....

Collusion

Thu, 10/08/2015 - 12:25 | 6644672 Atomizer
Atomizer's picture

Do not track is another one. That's the beauty of accessing this site with a BlackBerry Passport. Isn't that correct Tim Cook?  Tim is licking his iAnalpug wondering who to buy next to declare the foundation of technology. Copyright? Owning royalty fees? iIdiots.

Thu, 10/08/2015 - 11:57 | 6644565 Baa baa
Baa baa's picture

Try ad-aware.en.softonic.com/

Thu, 10/08/2015 - 11:36 | 6644452 pitterrier
pitterrier's picture

Bill - I respect your professional history and accomplishments, BUT, it's time to give it a rest and step of the stage, before you get thrown off.  Be a class act, be cool and be quiet.  The best outcome is that you win, get more of what you don't need (money) and in the fight, you lose your peers respect and your dignity.

Thu, 10/08/2015 - 11:45 | 6644494 LawsofPhysics
LawsofPhysics's picture

The criminals are turning on each other?  This is a very important signal.

If your pension has been holding PTRAX, it is run by morons.

Thu, 10/08/2015 - 11:46 | 6644498 Random_Robert
Random_Robert's picture

Andrew Balls =  Young, strong, aggressive male gorilla - wants more of the harem.

Bill Gross= Mature, experienced, Silver Back gorilla... The harem is his, until he dies. Andrew Balls is probably going to learn this lesson the hard way.

 

Mohamed El Arian - Harmless, make love not war Bonobo....   Got the hell out of Dodge before he was forced to make any real decisions

Thu, 10/08/2015 - 11:52 | 6644540 Baa baa
Baa baa's picture

Yeah, Billy is my boy!

Thu, 10/08/2015 - 11:49 | 6644514 tedstr
tedstr's picture

$5.00 on Gross to win by a nose.  ElErien is a dick

Thu, 10/08/2015 - 11:50 | 6644516 Kreditanstalt
Kreditanstalt's picture

When there's no real growth left anymore and all that remains is betting, the players will begin to cannibalize one another.

Thu, 10/08/2015 - 11:54 | 6644548 Soul Glow
Soul Glow's picture

He did himself a favor by leaving.  He should be happy.

Thu, 10/08/2015 - 12:04 | 6644552 Lucky Leprachaun
Lucky Leprachaun's picture

As a general comment, people clearly do not understand the level of fraud  perpetrated by the likes of Rubin, Bernanke, Geithner, Summers, and several others. They literally redefined what fraud is. Their actions  are the greatest defrauding of the worlds’ economic system in the history of the world, with zero exaggeration. Their fraud literally defies all sense of scale or propriety. Whatever is going on at PIMCO - has to be seen in the light of their handiwork.

Thu, 10/08/2015 - 12:00 | 6644579 Atomizer
Atomizer's picture

Bill Gross is being sued, he's passing on the liability to PIMCO. 

http://mfwire.com/article.asp?storyID=49845&template=article&bhcp=1

Thu, 10/08/2015 - 12:03 | 6644602 Pretty Vacant
Pretty Vacant's picture

Reading comprehension fail.  Article indicates Gross is not being motivated by money:

But to underscore the degree to which the suit is motivated by Mr. Gross’s desire to correct the public record, he has promised to donate any money he recovers to charity, his lawyer, Patricia L. Glaser, said.

Thu, 10/08/2015 - 12:10 | 6644625 mendigo
mendigo's picture

Now if he was having a sex change operation THAT would be news I could use.

Thu, 10/08/2015 - 12:24 | 6644696 cn13
cn13's picture

Bill Gross looks like one creepy dude. 

Steve Buscemi's little brother?

Thu, 10/08/2015 - 12:35 | 6644749 Seasmoke
Seasmoke's picture

Flies are buzzing around my head
Vultures circling the dead
Picking up every last crumb
The big fish eat the little ones
The big fish eat the little ones
Not my problem give me some

You can try the best you can
If you try the best you can
The best you can is good enough

Thu, 10/08/2015 - 13:06 | 6644964 Max Cynical
Max Cynical's picture

1st world issues.

My guess...he wouldn't sign a confidentiality/exit agreement which included provisions for his bonus payout. PIMCO therefore didn't pay the bonus and Gross (feeling more butt hurt than anything else) files suit. He's either contractually entitled to the bonus or not. This will be settled out of court.

The damage to PIMCO's reputation, however, may just be getting started as existing clients may be inclined to leave now having an understanding that the younger MBA's running the show are intent to take on additional risk (at their expense).

Thu, 10/08/2015 - 13:19 | 6645040 OneTinTrooper
OneTinTrooper's picture

Gross was way out ahead of everyone in telling us plebians that trillions in QE was coming.  You can all bad mouth him.  But I like the dude.

Thu, 10/29/2015 - 05:54 | 6725195 monad
monad's picture

He's a runt. He does what his wife tells him to. You want to lick sombodys' nuts, lick hers. At least she spends your money diluting the gene pool...

Thu, 10/08/2015 - 13:41 | 6645180 Livermore Legend
Livermore Legend's picture

As I said to you Bill, coining Morgan Freeman....

"Get Busy Living or Get Busy Dying"....

Unfortunately, you have chosen the latter.

 

Thu, 10/08/2015 - 14:05 | 6645308 LongSilverJohn
LongSilverJohn's picture

Section 3.1 of the Plan indicates that terminated employees would get the bonus up through the preceeding quarter (not the third quarter, since he was terminated prior to September 30).... 

I don't think the breach of contract claim is that good, but I would agree the breach of implied covenant of good faith and fair dealing would apply, as it covers situations where someone is fired right before they are to receive a bonus (e.g., a sales bonus on a deal they closed, but which is not payable until cash payment from the customer is received)... some states require a separate express breach of contract to support such a claim, however... not sure what CA provides.

Just sayin....

Thu, 10/08/2015 - 15:26 | 6645557 OneTinTrooper
OneTinTrooper's picture

Makes you wonder why there wasn't addional negotiation on his exit.  Maybe a retirement after a year or so on his terms.  Less bleeding of assets.  Gross was a stand up guy.  His monthly reports had some good stuff.  I have no idea who the rest of those guys are.

The other thing is that Gross put himself out there in his writings.  This made him vulnerable to public misperception that there must be something wrong with him. This firm will pay a price for mishandling the human side of this.

Thu, 10/29/2015 - 01:36 | 6724967 monad
monad's picture

Contract? Baseline was there.

Marketing material is marketing material.

Eat your mistakes. All of them.

Thu, 10/08/2015 - 18:28 | 6646679 Black Warrior W...
Black Warrior Waterdog's picture

Fucked by Mr. Balls.

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