Bill Gross was warned he would lose his bonus if he quit Pacific Investment Management Co. before the end of the quarter, PIMCO said in a court filing, challenging the central claim in his lawsuit against his former employer seeking hundreds of millions of dollars.
“He had no employment agreement, and he acknowledged that leaving PIMCO before the end of the third quarter of 2014 would render him ineligible for the profit sharing payments he now claims he is owed,” PIMCO said in a court filing Monday.
In its first response to the substance of Gross’s allegations in the state court suit in Santa Ana, California, PIMCO says the fund manager met with Chief Executive Officer Douglas Hodge and general counsel David Flattum on Sept. 25, 2014, the day before his exit, and was informed that he wouldn’t get the bonus if he quit. He left a handwritten resignation note the next morning, according to the filing.
“Very defensive, nothing remotely new,” Gross’s attorney, Patricia Glaser, said in response to the filing. “We’re anxious to have the case proceed.”
Gross departed PIMCO, which is owned by Allianz, after a public falling out with other top executives as lagging results at the PIMCO Total Return Fund, at the time the world’s largest mutual fund, led to a flood of redemptions. The firm’s co-founder, who now runs the $1.26 billion Janus Global Unconstrained Bond Fund, sued a year later, claiming he was ousted so that PIMCO wouldn’t have to pay him his roughly $200 million cut of the bonus pool and so other managing directors could increase their compensation.
Handwritten Note
After his departure, Newport Beach, California-based PIMCO’s assets under management fell more than 20 percent to $1.43 trillion at the end of 2015. The flagship Total Return Fund has shrunk to $87.8 billion from a 2013 peak of $293 billion.
Gross left behind a handwritten message “in the middle of the night, before walking out of PIMCO’s offices for the last time,” saying his resignation was effective Sept. 26, 2014, at 6:29 a.m. Pacific time, according to Monday’s filing.
“Mr. Gross ended his career at PIMCO with no notice or transition, disregarding the potential impact on the individual and institutional clients whose assets he was responsible for managing,” the firm said. “He exited PIMCO’s Newport Beach offices for the last time without telling anyone he was leaving. His longtime colleagues first learned of Mr. Gross’s departure from a press release issued by his new employer, Janus Capital Group, early on the morning of September 26, 2014.”
In addition to Gross losing his bonus because of the timing of his resignation, PIMCO said he has no grounds to sue because the firm “had good cause to terminate Mr. Gross’s employment based on his conduct,” according to the filing. PIMCO accused Gross of “trying to sabotage the careers of the former CEO and others he suspected of disloyalty, treating his colleagues abusively, and repeatedly threatening to resign without notice if he did not get his way.”
Gross, 71, whose estimated net worth is almost $2 billion, has said he will donate any award or settlement from the lawsuit to charity.
PIMCO acknowledged that Gross received $300 million in 2013 but disputed his contention he was entitled to more than $250 million for all of 2014, most of it paid out in the last two quarters.
‘Money Grab’
The partners who maneuvered to oust Gross were motivated to obtain his share of the bonus pool, according to Glaser.
“This lawsuit is about a money grab,” she said in an e-mail. “As Bill is alleging in his lawsuit, a handful of executives at PIMCO acted improperly and unethically in order to get a bigger piece of the pie — the piece that based on his contract belonged to Bill, and now for the benefit of charity as Bill has pledged to donate any proceeds.”
Superior Court Judge Martha Gooding ruled on March 14 that there was a legal basis for Gross’s claims and that the suit could proceed. Gooding said that Gross alleged sufficient facts regarding his status “as the founder, a 40-year history, an alleged track record of bringing success and/or fame to the enterprise, as well as a series of alleged oral promises/assurances of continued employment.”
The case is Gross v. Pacific Investment Management Co., 30-2015-00813636, California Superior Court, Orange County (Santa Ana).