‘Bond King’ Bill Gross sues Pimco over ouster

A spokesperson for PIMCO stated that the lawsuit lacks merit and the company will respond in court in due course.

In a 19-page Superior Court complaint filed Thursday in Orange County, Calif., Gross accuses current and former Pacific Investment Management executives of leaking disparaging information about him to the news media and ultimately engineering his ouster.

Mr Gross co-founded Pimco, an abbreviation of Pacific Investment Management Company, in 1971 and transformed it from running $12m of assets to $2trn until his departure in 2014. As pressure built, Gross said he began negotiating to resign as chief investment officer, cut his bonus, give up oversight of Total Return, and as “further humiliation” even be forbidden from entering Pimco’s offices in Newport Beach, California. His claim seeks compensation for the bonus, as well as for being forced to leave Pimco before receiving stock options and equity grants that had not yet vested.

Tracy Alloway of Bloomberg has “the Juiciest Nuggets From Bill Gross’s Lawsuit Against Pimco” (and they are juicy!) here.

Mr Gross, 71, said he had been “on track” to receive a bonus of more than $250m past year out of Pimco’s $1.3bn bonus pool.

“Ivascyn believed that Pimco was paying Mr. Gross tens of millions of dollars that should have instead gone to Ivascyn”, the complaint said.

“Mr Gross was concerned that Pimco’s expansion into new investment fields posed a particular liability to the company and its investors should another significant event, such as the collapse of Lehman Brothers, occur”.

The bond chief then quit the company on 26 September a year ago to move to Janus, sparking turmoil in the bond market as investors jockeyed for position in anticipation of an outflow from his bond fund.

Gross says he will donate any money he recovers from the lawsuit to charity.

In his lawsuit Gross specifically slams Mohamed El-Erian, the former Pimco co-chief investment officer he frequently clashed with. But does this legal and public relations strategy – which comes about 15 months after Gross famously donned a pair of sunglasses during his presentation at the annual Morningstar Investment Conference – make sense?

The lawsuit focuses on the conflict between Gross, Mohammed El-Erian – once considered Gross’ successor at Pimco – and other executives at the firm.

However, PIMCO Chief Executive Douglas Hodge and President Jay Jacobs did not withstand to Diekmann’s agreement and pushed him to renege on the deal with Gross.

The 71-year-old investor previously ran Pimco’s $270bn Total Return fund, which dominated the bond sector for many years and was the world’s biggest mutual bond fund at its peak.

On the other hand, any investors who followed him to Janus, where he manages just $1.4bn, got themselves a 2.5% loss. “In the minds of certain younger executives at Pimco, Mr. Gross’s ongoing presence at the company checked their own financial and career ambitions….”