Star bond fund manager Jeffrey Gundlach did not instruct anyone to copy analytic systems from his former employer, Trust Company of the West, but did devise a "defensive plan" in the event he would be fired, he testified in court.
Despite receiving assurances from TCW CEO Marc Stern in early September 2009 that there was no movement afoot to fire him, the chilly reception he got from an executive of Societe General (SOGN.PA) -- of which TCW is a unit -- later that same month convinced Gundlach otherwise, he told jurors on Tuesday.
"It was like talking to a piece of cardboard," Gundlach said upon meeting with Societe General executive Jacques Ripoll. "I felt a crack of doom."
Gundlach and his former employer, Trust Company of the West, are locked in a trial 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.
After meeting Ripoll, Gundlach testified that he initiated "defensive" activities in case he was fired, which were executed by members of his inner circle.
These included looking for commercial real estate; creating a shell company; copying client lists, client holdings, and portfolio trade orders, and consulting with Goldman Sachs about how to manage a potential exit from the company.
Gundlach, who calls himself "The Pope" and "The Godfather," was on the stand on Tuesday for his third day of testimony. Despite his defensive maneuvers, he also told jurors he repeatedly instructed DoubleLine employees not to use TCW data and to turn in devices that contained such data.
Gundlach thought it was "quite likely" that DoubleLine was going to fail six months after its formation, he said in court.
"We were losing tons of money" in June 2010, he told jurors on Tuesday. "It was quite likely the business would fail."
But in the following months, the firm attracted more clients and launched more funds and by the end of the year closed out with $6 billion in assets under management and $10 million in revenue, he added.
Gundlach is scheduled to return to the stand on Wednesday.
The case in Superior Court of California, County of Los Angeles is Trust Co of the West v. Jeffrey Gundlach et al, BC429385.