TCW sues fired CIO for alleged theft of client information

Jeffrey Gundlach allegedly set up his firm DoubleLine Capital, which is partly backed by Oaktree, by stealing TCW’s client information.

TCW, an investment firm selected to take part in the US government’s plan to unfreeze the credit markets, has sued its former CIO for allegedly stealing proprietary information to set up his own firm.

The lawsuit, filed with the Superior Court of California, claims Jeffrey Gundlach, the firm’s former CIO, established money management firm DoubleLine Capital through “wholesale theft of vast quantities of TCW proprietary information”.

TCW names three other former senior executives who the firm claims helped Gundlach steal the firm’s property, including information about private trade transactions and “secretly downloading” client and portfolio holding data and confidential client contact information for 24,000 TCW clients and prospects.

“The total amount of stolen information, if printed out, would total approximately nine million pages, or 3,700 banker boxes of documents,” TCW said in the court filing.

TCW also claims Gundlach was unfit to serve as an executive, corroborated by the alleged discovery in Gundlach's office of marijuana, drug paraphernalia, a collection of 12 sexual devices, 34 hardcore pornographic magazines and 36 “hardcore sexually explicit DVDs and videocassettes”, TCW said.

DoubleLine Capital responded in a public statement that the “allegations in the lawsuit are meritless”. DoubleLine and Gundlach are filing their own lawsuit to address the TCW claims and “seek redress for TCW’s deplorable conduct”.

“The false and hyperbolic personal attacks by TCW are obviously a gratuitous and irrelevant gutter tactic, which merely underscores the weakness of TCW’s claims,” DoubleLine said.

DoubleLine is partly backed by Oaktree Capital Management, which took a minority stake in the young firm.

TCW, which invests in real estate, distressed debt, energy and infrastructure and mezzanine, dropped out of the US government’s Public Private Partnership Program earlier this month because a key-man clause was triggered after Gundlach was fired in December.

The UST/TCW Senior Mortgage Securities Fund was one of the first of the nine pre-qualified managers in the programme to hold a first close on $500 million for the fund. Investors in the fund are able to transfer their commitments to other PPIP managers.