Ex-PIMCO Money Manager Accused Firm of ETF Manipulation

A former money manager at Pacific Investment Management Co. accused the firm in a lawsuit last year of manipulating the price of its PIMCO Total Return ETF, a claim similar to the focus of a U.S. Securities and Exchange Commission probe.

Jason Williams filed a wrongful termination claim last year, accusing PIMCO managers of verbally abusing him and cutting his pay after he objected to alleged misconduct. He was fired in March 2012, three weeks after telling the firm he had spoken with agents overseeing a U.S. bailout program and was cooperating with their inquiry, according to his lawsuit, in state court in Santa Ana, California.

Williams, whose complaint included a list of alleged wrongdoing at PIMCO, withdrew the case three days after filing it, and court records don’t indicate why. He left the industry and declined to comment on the suit or why he dropped it when reached by phone in Montana, where he bought a bar.

The SEC inquiry emerged last week. The agency is examining whether the PIMCO Total Return ETF, an exchange-traded fund run by Bill Gross until this month, purchased small lots of bonds at discounts, then marked them up when valuing holdings to artificially boost returns, a person familiar with the probe said Sept. 24, requesting anonymity because it’s confidential.

Gross’s Exit

It couldn’t be determined whether there’s any link between Williams’s claim and the SEC’s examination. John Nester, a spokesman for the agency, declined to comment. Williams said in his suit that he conveyed his suspicions to special agents for the inspector general for the Treasury Department’s Troubled Asset Relief Program near the end of 2011. Troy D. Gravitt, a spokesman for that office, also declined to comment.

The inspector general’s office has scrutinized programs that used government funds to help banks damaged by the financial crisis sell mortgage-backed securities into the market. Its inquiries also have looked at the industry’s pricing and trading practices for such assets.

PIMCO and Gross, who left the company last week after a dispute with management over strategy amid record redemptions, haven’t been accused by authorities of any wrongdoing.

Mark Porterfield, a spokesman for Newport Beach, California-based PIMCO, declined to comment on the lawsuit. Gross, 70, didn’t respond to phone calls, as well as messages left with Janus Capital Group Inc., the firm he joined. PIMCO said last week that it’s cooperating with the SEC.

“We believe our pricing procedures are entirely appropriate and in keeping with industry best-practices,” it said at the time. It takes “regulatory obligations and responsibilities to our clients very seriously.”

‘Performance Reasons’