Fund Manager Gundlach Trial Begins

DoubleLine Capital CEO Jeffrey Gundlach has made a lot of money calculating where the bond market will go.

Jeffrey Gundlach

But his former employer goes to court today to try to prove Gundlach miscalculated when he prepared to start DoubleLine while still employed at TCW.

"Jeffrey Gundlach and his team stole nine million pages of documents," says TCW's outside counsel trying the case, Susan Estrich. "If you stacked them up, that's two and a half Empire State Buildings."

Gundlach and three co-defendants are accused of plotting for months to start DoubleLine while working at TCW, allegedly after the bond manager learned he would not ever become CEO. The complaint describes a long list of thefts, "including client and portfolio holdings data and confidential and proprietary contact and related information for 24,000 TCW client contacts and prospects."

TCW claims forensic experts will prove Gundlach secretly downloaded the information. The firm also claims Gundlach began badmouthing TCW to clients.

"It's as if a restaurant chef not only stole the recipes...but then turned around and told all your clients, based on this information, 'By the way, you're going to get food poisoning if you eat there,'" Estrich says.


The complaint says TCW is seeking at least $200 million in damages.

"This idea that I'm a thief, or that somehow we lied or misrepresented to the clients—nothing could be further from the truth," Gundlach said in an interview with CNBC last year. He is not commenting now, as jury selection begins on what is expected to be a four- to six-week trial.

The judge is allowing jurors to consider a counterclaim by Gundlach that he is owed over a billion dollars in fees from TCW. What is not being allowed, however, are allegations that after his firing, TCW discovered in Gundlach's office "marijuana, drug paraphernalia, including paraphernalia bearing recent use, and a collection of 12 sexual devices, 34 hardcore pornographic magazines and 36 hardcore sexually explicit DVDs and videocassettes." The judge has ruled them irrelevant.

TCW's Estrich says they may be able to bring up what she claims was a sexual relationship between Gundlach and a co-defendant. "It is very relevant."

Gundlach told us he's been willing to settle, but TCW claims he's turned down two settlement offers.

As for the allegations of porn and pot in his office, Gundlach told us last year, "I'm not really going to take the low road that TCW's gone down. There's many things of that kind of status that I could've brought out against the leadership of TCW... no one's perfect and I think it's wrong to spy on someone's personal life and then use it maliciously against them."

Here is the entire interview with Jeffrey Gundlach last year.