Bill Gross, known often as the ‘Bond King’, has sued Pimco – the company he helped found in 1971 – for its part in driving him out the firm last September. The suit, filed on October 8 in Orange County, alleges that younger executives at the firm ousted him in order to cash in on his 20 percent stake in a $1.3bn bonus pool.
Since his departure, investors have pulled billions of dollars out of Pimco funds
According to the lawsuit, Pimco “wrongly and illegally” withheld hundreds of millions of dollars in compensation owed to Gross. “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,” the document goes on, “a cabal” of “managing directors plotted to drive founder Bill Gross out of Pimco,” according to documents seen by The Wall Street Journal.
Since his departure, investors have pulled billions of dollars out of Pimco funds – although the scale of the outflows has diminished in recent months. Assets held by the firm’s flagship fund have slumped to $100bn, down from a 2013 high of $300bn.
Gross’ case marks an attempt on his part to restore his damaged reputation. In the time since his departure, the former executive has been portrayed as a disruptive influence on the firm he helped create, although the lawsuit, if successful, could clear some of the marks against his name.
Gross’ version of events are that Mohamed El-Erian, chief executive at the time of his departure, and he were at odds over the direction of the firm – with Gross opposed to El-Erian’s intentions to pursue riskier investments, away from its core bonds business. The suit also claims Gross was set to receive $250m in bonus payments last year, adding that the firm denied him an $80m bonus for the third quarter, despite him leaving a matter of days before the quarter’s end.
