Trust Company of the West CEO Marc Stern offered to be a sacrificial lamb to keep unhappy star bond fund manager Jeffrey Gundlach at the firm, he testified in court.

His attitude towards me was becoming increasingly negative when he came back to the company as CEO in mid-2009, Stern told jurors on Thursday.

I was happy to be the sacrificial lamb, Stern said he told executives at Societe Generale SA (SOGN.PA) of which TCW is a unit.

However, Societe Generale executives rejected Stern's offer to leave the firm, Stern said.

Gundlach and TCW are locked in a trial with hundreds of millions of dollars on the line that has given a rare glimpse into the inner workings of investment firms and the big personalities who run them.

TCW fired Gundlach in December 2009 and sued him a month later, accusing him of stealing trade secrets, plotting to form a new company using TCW proprietary information and gutting the firm of its entire mortgage-backed securities team.

Gundlach fired back with a counter-lawsuit, alleging his former employer owed him hundreds of millions of dollars in compensation.

In the weeks following his termination, Gundlach went on to form DoubleLine Capital, along with three of his co-defendants in the case. Roughly 45 TCW employees, largely from the mortgage-backed securities group, followed.

Days before Stern returned to lead TCW in 2009, he acknowledged starting to plan Project G, a contingency plan for the horror case scenario in which Gundlach might be fired for what Stern described as insubordinate, increasingly bizarre behavior.

The secret project included a proactive strategy of trying to convince Gundlach to stay, as well as a defensive strategy of identifying a mortgage-backed securities firm that could parachute in to replace him if he did leave.

Losing Gundlach would be like cutting off your right arm, Stern said.

He was the most important person in the firm, he added.

TCW acquired MetWest after terminating Gundlach in December 2009.

The case in Superior Court of California, County of Los Angeles is Trust Co of the West v. Jeffrey Gundlach et al, BC429385.