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October 08, 2015 at 10:47 AM
One year after he was pushed out of the bond fund shop he founded, Bill Gross is suing PIMCO and its parent company, Allianz, for “hundreds of millions of dollars,” according to the lawsuit filed in a Southern California court.
Patty Glaser, the lead attorney representing Gross, who is now with Janus Capital, says proceeds from the lawsuit will go to charity, including the PIMCO Foundation.
In the suit, which is now available online, the fixed-income expert says he was wronged and deserves compensation. 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?
“There’s really been nothing out there that has justified his position or told his story, so this [suit] could be helpful in that it gets his side of the story out there. And there is the issue of money, too,” said Patrick Burns, an attorney based in the Los Angeles area who represents breakaway brokers and others.
“He’s trying to get across the justifiable reasons for his defense and why he had to leave,” Burns explained. “He also explains that [PIMCO] was going in different, risker directions and that he was not on board with that. Plus, without his [taking] 20% of the bonus pool, there’s a bigger slice of the pie for others.”
(Gross claims that he should have received a bonus of at least $200 million for his contributions through Sept. 26, 2014.)
Shakespearian Plot
Gross’ complaint reads like “Hamlet:”
“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 Pacific Investment Management Company 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. Their improper, dishonest and unethical behavior must now be exposed.”
He is the victim, according to the suit.
“Mr. Gross’s ongoing success at PIMCO proved to be his undoing. In the minds of certain younger executives at PIMCO, Mr. Gross’s ongoing presence at the company checked their own financial and career ambitions,” the suit states. “Under PIMCO’s profit-sharing plan Mr. Gross was entitled to receive 20% of the entire profit sharing bonus pool each year. By forcing him out of PIMCO, the younger executives would split Mr. Gross’s share of the bonus pool amongst themselves.”
In contrast, the lawsuit portrays Gross as a warrior for investors.
“He championed reasonable fees for PIMCO’s services and was vocally skeptical inside the firm of a select group of the younger executives’ desire to transform PIMCO into a high-risk, high-fee asset-management company that invested in riskier equities and leveraged real estate investments, as opposed to the stable bonds that built the firm’s reputation,” the lawsuit states. Furthermore, as long as Gross remained “at the company he founded, these younger executives were unable to transform PIMCO, increasing client risk and their own compensation. As a consequence, Mr. Gross became the target of a power struggle within PIMCO, a struggle that eventually led to his wrongful and illegal ouster from the company he founded and a struggle where PIMCO wrongly and illegally denied Mr. Gross hundreds of millions of dollars in earned compensation.”
