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TCW/Gundlach court drama turned over to jury

Bond fund manager Jeffrey Gundlach testifies in court in Los Angeles
Bond fund manager Jeffrey Gundlach testifies in court in Los Angeles

By Mary Slosson

LOS ANGELES (Reuters) - Lawyers for Trust Company of the West and its former chief investment officer, star bond fund manager Jeffrey Gundlach, presented their closing arguments Tuesday to a 12-person jury that is to decide their fate.

They are pitted against each other in a high-stakes trial that has transfixed the financial services industry with an insider's view into investment firms and the big personalities that run them. Hundreds of millions of dollars are ultimately on the line in the case.

TCW plotted to fire Gundlach before his inner circle ever began downloading information, Gundlach's lawyer told jurors, in a secret plot that TCW executives dubbed "Project G."

TCW then covered up its plans in a "conspiracy of silence," attorney Brad Brian said on Tuesday.

"They shot him without warning. This was not a random act. It was premeditated," Brian said, referring to TCW's sudden termination of Gundlach.

Brian's presentation in a Los Angeles courtroom marked the final day of arguments in a sometimes testy but often gripping trial. Jurors have heard testimony about tirades against TCW by Gundlach in the company cafeteria, about a power struggle in which Gundlach wanted to become CEO and even about a hard drive secreted out of TCW's offices in the bra of an employee.

TCW, a unit of French bank Societe Generale , fired Gundlach in December 2009 and sued him a month later, accusing him of stealing trade secrets, plotting to form a new company using TCW proprietary information, and gutting the firm of its entire mortgage-backed securities team.

Gundlach fired back with a counter-lawsuit, alleging that his former employer owed him hundreds of millions of dollars in compensation and had secretly plotted to fire him while he was still chief investment officer.

In the weeks following his termination, Gundlach went on to form DoubleLine Capital, along with three of his co-defendants in the case. Roughly 45 TCW employees, largely from the mortgage-backed securities group, followed.

GROSS VS GUNDLACH

Jurors also heard testimony that Gundlach was recruited by Pacific Investment Management Company, possibly to succeed his bond fund rival Bill Gross. Gundlach and Gross were both contenders for Morningstar's Fixed Income Manager of the Decade award for 2000-2009, an award that Gross ultimately won.

The trial also experienced a brief hiccup when Gundlach spoke with two jurors in a courthouse elevator after a day on the witness stand, telling them, "I feel bad for you guys," after thinking they were talking to him.

The judge admonished Gundlach and the jurors, but ultimately considered the incident a minor mishap.

The warm courtroom was packed on Tuesday, with audience members sitting shoulder to shoulder. Gundlach sat in the front row, at the center of the bench. TCW CEO Marc Stern sat nearly directly behind him in the second row.

TCW attorney John Quinn said in his closing statement that Gundlach and his inner circle plotted to destroy TCW by forming their own company at TCW's expense.

"They essentially stopped working for TCW, and worked against TCW," Quinn told jurors. "And they did all these things while drawing their very generous paychecks."

Jury deliberations are expected to begin on Wednesday morning. Judge Carl West read instructions on how the jury is to reach a decision in the case Tuesday afternoon after the legal teams finished closing arguments.

The case is in Superior Court of California, County of Los Angeles is Trust Co of the West v. Jeffrey Gundlach et al, BC429385.

(Reporting by Mary Slosson, editing by Ted Kerr, Matthew Lewis, Gary Hill)

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