Bill Gross complaint

8/20/2019 Bill Gross complaint

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PATRICIA

.

GLASER S t a t e Bar No. 5668

p g l a s e r ~ ~ l a s e r w e i l

om

G.

JILL BASINGER

S t a t e

Bax

No. 195739

j

a s i n g e r @ g l a s e r w e i l .

com

RORY

.

MILLER

State

Bar

No.

23 780

r m i l l e r ~ ~ l a s e r w e i l

om

GLASER

WEIL

FINK

HOWARD

AVCHEN

HAPIRO

LLP

10250

o n s t e l l a t i o n

Boulevard,

9 t h F l o o r

Los Angeles,

a l i f o r n i a

90067

Telephone: 310) 53-3000

F a c s i m i l e :

310)

56-2920

A t t o r n e y s

f o r P l a i n t i f f

William H.

Gross

SUPERIOR

COURT OF THE

STATE

OF

CALIFORNIA

FORTHECOUNTYOFORANGE

WILLIAM

H.

GROSS n

n d i v i d u a l

P l a i n t i f f

v .

PACIFIC

INVESTMENTMANAGEMENT

COMPANY

LLC Delaware

l i m i t e d

l i a b i l i t y

company,

ALLIANZ ASSET

MANAGEMENT

OF AMERICA

. P .

a

Delaware

l i m i t e d

p a r t n e r s h i p

and

DOES

- 1 0 0 n c l u s i v e

Defendants.

Case No.

U n l i m i t e d

J u r i s d i c t i o n

COMPLAINTFOR:

1)

CONSTRUCTIVE

TERMINATION

2)

BREACH

OF

CONTRACT

3)

BREACH

OF

COVENANT

OF

GOOD

FAITH

AND FAIR

DEALING

JURYTRIAL

DEMANDED

1044676

COMPLAINT


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INTRODUCTION

1 . Driven by a u s t f o r power, r e e d , and

a d e s i r e t o improve t h e i r

own i n a n c i a l

p o s i t i o n

and

r e p u t a t i o n

a t

t h e

expense of

n v e s t o r s and

decency, a

a b a l

of a c i f i c

Investment

Management Com pany

LLC

PIMCO )

anaging

d i r e c t o r s p l o t t e d t o

d r i v e founder B i l l Gross

ou

ofPIMCO

n

o r d e r

t o t a k e ,

without compensation, r o s s ' s

p e r c e n t a g e ownership i n

t h e

p r o f i t a b i l i t

of

PIMCO.

h e i r

improper, i s h o n e s t , and

u n e t h i c a l

b e h a v i o r m u s t

n o w be

exposed.

2 .

P l a i n t i f f

B i l l Gross founded

d e f e n d a n t PIMCO

ver 40

e a r s

ago

and

has been

i n t i m a t e l y

connected w i t h i t s investment c t i v i t i e s s i n c e t h a t

t i m e .

As

a

founder and s e n i o r

e x e c u t i v e ,

as

w e l l

a s

aworld-renowned

i n v e s t o r ,

Mr .

Gross

e c e i v e d s u b s t a n t i a l

i n come a s

PIMCO

grew

and e s t a b l i s h e d i t s e l f

a s on e

of

h e

l e a d i n g

f i x e d

i n come s e c u r i t y

investment i r m s

i n

t h e

world.

3 .

Mr. r o s s ' s

ongoing

s u c c e s s a t PIMCO

roved t o

be

h i s undoing.

In

t h e

mi nds

of

c e r t a i n younger

e x e c u t i v e s a t

PIMCO,

r .

r o s s ' s

ongoing

p r e s e n c e

a t t h e c o m p a ny

checked

t h e i r

o v u m

f i n a n c i a l and

c a r e e r

a m b i t i o n s . Unde r

PIMCO's

p r o f i t - s h a r i n g

p l a n Mr .

Gross

was n t i t l e d

t o

r e c e i v e 20 f

h e

e n t i r e

p r o f i t

s h a x i n g

bonus pool

each y e a r .

By o r c i n g

h i m

out of

PIMCO, h e

younger

e x e c u t i v e s

would

s p l i t Mr . r o s s ' s s h a r e of h e bonus pool

amongst

h e m s e l v e s .

4 .

In a d d i t i o n t o r e c e i v i n g compensation

c o n s i s t e n t w i t h

h i s s k i l l

and r e p u t a t i o n ,

Mr .

Gross

was

l s o well-known

as

an

a d v o c a t e

f o r

PIMCO's n v e s t o r s . He

hampioned

r e a s o n a b l e

f e e

f o r

PIMCO's e r v i c e s

and

wa s

v o c a l l y s k e p t i c a l i n s i d e

t h e f i r m of a

e l e c t group

of h e

younger

e x e c u t i v e s '

d e s i r e

t o

t r a n s f o r m

PIMCO n t o

a h i g h - r i s k ,

high

- f e e a s s e t

-management

c o m p a ny

h a t

i n v e s t e d

i n r i s k i e r

e q u i t i e s and l e v e r a g e d r e a l e s t a t e

i n v e s t m e n t s ,

a s

opposed

t o

t h e s t a b l e

bonds

h a

b u i l t t h e

f i r m ' s

r e p u t a t i o n .

5 .

As

ong

a s

M r .

Gross remained a t

t h e

c o m p a ny

h e

founded,

h e s e

younger

e x e c u t i v e

were

unable t o

t r a n s f o r m

PIMCO, n c r e a s i n g c l i e n t r i s k

and

h e i r

own

ompensation.

As

consequence, Mr . Gross

became h e t a x g e t of a

powe r t r u g g l e

w i t h i n

PIMCO

a

t r u g g l e

t h a t

e v e n t u a l l y l e d t o

h i s

wrongful and i l l e g a l

o u s t e r from t h e c o m p a ny h e

founded

and

a

t r u g g l e

w her

PIMCO v ~ r o n g l y

and

i l l e g a l l y

d e n i e d Mr .

Gross

hundreds of

i l l i o n s

of

o l l a x s

i n

e a r n e d

compensation.

1044676

1

COMPLAINT


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THE

ARTIES

6 .

P l a i n t i f f

William

H. Gross s

aworld-renowned

i n v e s t m e n t

manager

o c u s i n g

o n

bonds and o t h e r

f i x e d income s e c u r i t i e s . Over h i s

n e a r l y

5 0 y e a r s

i n

t h e

i n d u s t r y ,

Mr.

Gross has

developed

a

towering

r e p u t a t i o n t h a t

h a s ,

a m o n g

o t h e r

t h i n g s ,

e d

t o

h i m

being

c a l l e d

t h e

Bond

King

by h e f i n a n c i a l

media.

At

l l r e l e v a n t t i m e s ,

Mr.

Gross w a s a e s i d e n t o f

Orange

County,

C a l i f o r n i a .

7 .

Defendant PIMCO

s

a

Delaware i m i t e d

l i a b i l i t y c o m p a ny w i t h

a r i n c i p a l

p l a c e of

b u s i n e s s a t 650 New p o r t

e n t e r

D r i v e , N e v v ~ p o r t

Beach,

a l i f o r n i a .

8 .

Defendant

A l l i a n z

Asset

M an ag e m e n t

of

America L . P .

i s

a

Delaware

l i m i t e d

p a r t n e r s h i p

w i t h

a

p r i n c i p a l

p l a c e

of

u s i n e s s a t

6$0

Newport

e n t e r Drive,

New p o r t

Beach,

C a l i f o r n i a .

9 .

Defendants D oe s

1 through

100, n c l u s i v e , a r e

sued

h e r e i n

under

i c t i t i o u s

names.

T h e i r t r u e

n a m e s and c a p a c i t i e s a x e

unknov~m

t o

P l a i n t i f f .

When h e i r t r u e

n a m e s

and c a p a c i t i e s

a r e

a s c e r t a i n e d , P l a i n t i f f w i l l

a m e n d h i s complaint by n s e r t i n g t h e i r t r u e

n a m e s and

c a p a c i t i e s h e r e i n .

P l a i n t i f f s

informed

and b e l i e v e s , and

o n

h a t

b a s i s a l l e g e s ,

t h a t

each of

h e f i c t i t i o u s l y

n a m e d

d e f e n d a n t s

i s

t h e a g e n t , s e r v a n t ,

employee, e p r e s e n t a t i v e ,

p a r t n e r ,

and j

i n t - v e n t u r e r

of h e i r

co-

d e f e n d a n t s , and

i n

doing t h e

t h i n g s

h e r e i n a l l e g e d

w a s

c t i n g

w i t h i n

t h e

c o u r s e

and

scope of

uch

agency, employment,

e p r es e n t a t i o n , p a r t n e r s h i p , and

j i n t

v e n t u r e w i t h

t h e knowledge,

e r m i s s i o n

and

consent

of

h e i r

c o - d e f e n d a n t s , and

so

r a t i f i e d l l of h e i r a c t s

and c o n d u c t .

T h e r e f o r e , each D o

Defendant

s

r e s p o n s i b l e

i n

s o m e manner o r

t h e o c c u r r e n c e s

h e r e i n

a l l e g e d ,

and

P l a i n t i f f

amage

a s h e r e i n a l l e g e d were p r o x i m a t e l y

caused by

a i d

d e f e n d a n t s .

1 0 . At

l l

r e l e v a n t

t i m e s ,

each

Defendant w a s h e agent of

h e

o t h e r

Defendants and

w a s

a t

l l

times

a c t i n g

w i t h i n

t h e

purpose

and

scope

o f

such agency.

Moreover,

n

committing

t h e

a c t s

and

omissions

a s s e r t e d h e r e i n ,

Defendants,

and each of hem,

were

a c t i n g

i n

c o n c e r t t o g e t h e r , n

t h e

c o u r s e

and

scope o f h e i r r e s p e c t i v e r e l a t i o n s h i p w i t h

each

o t h e r ,

whether

as

employees,

g e n t s ,

r e p r e s e n t a t i v e s , independent c o n t r a c t o r s ,

p r o v i d e r s , s e r v i c e

p r o v i d e r s , a s

a g e n t s o r

r e p r e s e n t a t i v e s o

each

o t h e r , r e s p e c t i v e l y , o r

a s o i n t

v e n t u r e r s ,

c o - c o n s p i r a t o r s or

o t h e r w i s e .

1044676

COMPLAINT


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FACTUALBACKGROUND

ANDGENERAL

ALLEGATIONS

A.

Mr.

ross Founds

PIMCO

1 1 .

Mr. ross r a d u a t e d

with a degree

n

psychology

from

Duke

n i v e r s i t y i n

1966.

1 2 . A f t e r g r a d u a t i o n

and

a

o l o r f u l

p e r i o d

i n

which,

mong t h e r a c t i v i t i e s , Mr.

ross

was

a

r o f e s s i o n a l b l a c k j a c k

p l a y e r ,

Mr. ross w a s

ommissioned

a s

an Ensign n

t h e

United t a t e s

Navy

and,

rom 1966

o 1969, e r v e d

i n

Vietnam

aboard

a e s t r o y e r .

Following i s

r e t u r n

from

Asia,

e n r o l l e d

i n t h e Anderson

School of Management t

UCLA nd

earned an MB e g r e e i n

1971.

1 3 .

Subsequent o

e a r n i n g h i s

MBA r.

ross ook

i s

f i r s t p o s i t i o n i n t h e

f i n a n c i a l

i n d u s t r y

w h e n

h e

was

i r e d

as

an

s s i s t a n t

v i c e

p r e s i d e n t

f o r

f i x e d

income

e c u r i t i e s a t P a c i f i c

Mutual

i f e I n s u r a n c e

Company. Along

with

t w o

of i s

c o l l e a g u e s

a t P a c i f i c

Mutual,

ames Muzz

and William o d l i c h , Mr. ross

founded a n e w

nvestment

management i v i s i o n

a t

t h e

company n

1971.

Over

i m e ,

t h i s

d i v i s i o n

would

grow n t o PIMCO.

1 4 . Mr.

ross

o n t i n u e d t o develop i s

s k i l l s

w h i l e

a t P a c i f i c Mutual

and

PIMCO.

n

1976,

e

e c e i v e d

h i s

C e r t i f i e d

F i n a n c i a l Analyst r e d e n t i a l s , a l o n g w i t h g a r n e r i n g

more

and

more

r e c o g n i t i o n

b o t h w i t h i n

t h e investment

management ommunity and

n

t h e b r o a d e r b u s i n e s s

w o r l d .

1 5 . Under Mr.

r o s s ' s

l e a d e r s h i p ,

PIMCO

n t r o d u c e d

a e v o l u t i o n

i n

t h e

i n v e s t m e n t

world:

a c t i v e l y

managed b ond o r t f o l i o s .

P r i o r

t o

Mr.

r o s s ' s

e f f o r t s a t

PIMCO ond

o r t f o l i o s

w ere

t a i d i n v e s t m e n t

p r o d u c t s ,

t y p i c a l l y

purchased

a t i s s u e and h e l d u n t i l m a t u r i t y .

Mr. ross and

h i s c o l l e a g u e s ,

however,

aw

h e o p p o r t u n i t y t o

i n c r e a s e

r e t u r n s

f o r

i n v e s t o r s through

a r e f u l

s e l e c t i o n ,

buying, e l l i n g

and

r a d i n g

of

onds.

I n

f a c t , Mr. ross was n s t r u m e n t a l

i n

d e v e l o p i n g

n e w models

o r

t h e

c r e a t i o n

of

i n a n c i a l index o r bond

m a r k e t s ,

and

w a s ven

a named

n v e n t o r

on

a

United

t a t e s

p a t e n t

based

on

h a t

work.

1 6 . Over h e next e c a d e s , Mr.

ross b e c a m e one

of

h e

foremost

u t h o r i t i e s on h e

bon

markets

and

aworld-famous investment

manager.

1 7 .

Mr.

r o s s ' s

investment

u c c e s s i s based

n l a r g e

p a r t

upon

i s p e r s o n a l

p h i l o s o p h y

r e g a r d i n g

i n v e s t m e n t s .

Mr.

ross o c u s e s on

e v e l o p i n g a

s e c u l a x

i . . ,

l o n g - t e r m ) o u t l o o k f o r

t h

maxket and h e n

s t r u c t u r i n g

h i s

i n v e s t m e n t p o r t f o l i o

a c c o r d i n g l y . Mr.

ross

e l i e v e s

t h a t

doing

so

3

1044676

COMPLAINT


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a l l o w s

an n v e s t o r

t o

focus

o n long term

market

r e n d s and a v o i d g e t t i n g

caught u p

n

emotional

r e s p o n s e s

t o

i r r a t i o n a l

o c c u r r e n c e s

i n

t h e m a r k e t . On e example

o f

h i s

p h i l o s o p h y i n a c t i o n

was

Mr

Gross

and

PIMCO

o i n i n g and

p o p u l a r i z i n g

t h e p h r a s e the n e w normal

o d e s c r i b e

a e r i o d o f

time

where

h e r e

was

i t t l e

t o

no

e c o n o m i c growth

i n t h e

world

e c ono my.

1 8 . This n v e s t m e n t s t r a t e g y ,

and Mr.

r o s s s

sk ill

a t implementing t ,

l e d t o

phenomena

r e s u l t s

f o r

PIMCO,

r .

Gross, and, m o s t

m p o r t a n t l y ,

h e

c l i e n t s

w h o

n t r u s t e d Mr.

Gross

w i t h

t h e

m a n a g e m e n t

o f

h e i r m oney.

F r o m

h e

1980s

through h e

2000s,

Mr.

G ross

a c h i e v e d r e t u r n s a t o r

n e a r

double d i g i t s ,

which

a r e

t y p i c a l l y

only seen

i n t h e

f a x r i s k i e r

e q u i t i e s

m a x k e t s . Under i s

g u i d a n c e ,

PIMCO

rew d r a m a t i c a l l y and went u b l i c

o n

h e

New o r k

Stock Exchange

n

1994.

1 9 . In

1996,

Mr. Gross was h e f i r s t p o r t f o l i o

manager

n d u c t e d

i n t o t h e

Fixed- In come

Analyst S o c i e t y H a l l o f

Fa m e

o r

h i s major

c o n t r i b u t i o n s

t o t h e advancement

o f

ond and

p o r t f o l i o

a n a l y s i s .

Mr.

Gross was l s o

n a m e d

M o r n i n g s t a r

Fixed I n c o m e Manager o f

h e Year h r e e

s e p a r a t e

t i m e s ,

n

1998,2000 and 2007. This

s t u n n i n g

performance

i n

both b u l l and b e a x

markets

l e d Mr .

Gross

o being

nam e d

Morningstar

Fund

Manager

o f

h e De cade

2000-2009.

20.

When r .

Gross

and h i s c o l l e a g u e s

founded

PIMCO,

t had $12

i l l i o n i n

a s s e t s .

By 013,

t

t h e

peak

o f PIMCO's i z e and

l a r g e l y due

o

Mr.

r o s s s

r e p u t a t i o n

and

r a c k

r e c o r d , h

and

PIMCO ere

managing n e a r l y $2 r i l l i o n i n

a s s e t s ,

and

h i s

f l a g s h i p

T o t a l

Return

Fund was

h e

w o r l d s l a r g e s t mutual fund, with n e a x l y

$300

i l l i o n i n

a s s e t s .

B.

Mr. r o s s and

PIMC4 s

uccession Plan

E f f o r t s

F a i l

Due o

E1-Erian

21. By 007,

Mr.

Gross had been p a r t o f

PIMCO

o r 35

y e a x s

and had b e g un

o

c o n s i d e r

s u c c e s s i o n p l a n s , a s he

was

n

h i s s i x t i e s . B i l l T h o m p s o n , hen-Chief

Executive O f f i c e r o f

PIMCO,

was

o f a i m i l a r a g e , and

a l s o

l o o k i n g

t o

p l a n

f o r

an

o r d e r l y

t r a n s i t i o n f r o m

PIMCO. h e p a i r

bega

t o

seek a

s u c c e s s o r ,

whom

hey

b e l i e v e d

t h a t

they

had

found

i n

a

former

PIMCO

mployee,

Mohamed

l - E r i a n .

22. F r o m

1999

o

2006,

l - E r i a n had

been

PIMCO's

head o f

m e r g ing

Markets.

He

a

c o m e

o

PIMCO i t h

an

m p r e s s i v e

resume h a t

b o a s t e d a decade and a a l f a t t h e

I n t e r n a t i o n a l

Monetary

Fund and a

t i n t

a t

C i t i g r o u p i n

London.

In

2006,

1 - E r i a n

had

l e f t PIMCO

n

g o o d

terms

n o r d e r t o b e c o m e h e P r e s i d e n t and

Chief Executive

O f f i c e r

o f

arvard

Manag e m e nt

1044676

4

COMPLAINT


6/37

1

3

4

5

6

7

8

9

10

11

12

~ ~

13

~

14

C~

t~

~

15

16

17

18

19

20

21

23

24

25

26

27

28

Company,

wholly-owned

u b s i d i a r y

of

arvard U n i v e r s i t y

r e s p o n s i b l e f o r

managing

a r v a r d ' s

$30 i l l i o n

endowment.

23.

E l - E r i a n

r e c e i v e d h i s f i r s t

s u b s t a n t i v e exposure

o

a o s t

of i g h

- r i s k

d e r i v a t i v e

a s s e

c l a s s e s

w h i l e

a t

Harvard.

Through

h e

use

of

h e s e

h i g h

- r i s k

a s s e t s ,

E l - E r i a n

was

b l e t o

w i t n e s s

a

23 return on

n v e s t m e n t

i n

h i s

only

u l l

y e a r

a t

Harvard growth

h a t came

u r i n g

what

would

soon be

e c o g n i z e d

a s t h e market bubble of h e

mid- 2 0 0 0 s . From

h i s

e x p e r i e n c e , E l - E r i a n

became

convinced of h e

a t t r a c t i v e n e s s

of

uch

high

- r i s k

i n v e s t m e n t s ,

e s p e c i a l l y

s i n c e he

had

not

y e t been

exposed o t h e i r

downside

u r i n g

t h e

Great

ecession

of

007

h a t was

oon

o f o l l o w .

24. A f t e r r e p o r t e d l y

c l a s h i n g w i t h

Harvard

r e s i d e n t L a r r y

Summers, l - E r i a n

began

e x p l o r i n g

h i s

r e t u r n

t o

PIMCO

n

t h e

middle

of

007.

Over

h e c o u r s e

of

e v e r a l

months'

n e g o t i a t i o n ,

a e a l

was

made between

l - E r i a n , Mr.

ross,

and

i l l

Thompson,

IMCO' s hen

-

Chief

x e c u t i v e O f f i c e r , whereby

l - E r i a n

would

e t u r n

t o

PIMCO

s

co

-Chief

x e c u t i v e O f f i c e r

and

co

-Chief nvestment

f f i c e r ,

w i t h t h e i n t e n t i o n

of

l t i m a t e l y

s u c c e e d i n g

one

or

o t h

of

h e s e

i n d i v i d u a l s .

25.

Mr.

ross was l e a s e d t h a t

a

u c c e s s i o n p l a n

was

n

p l a c e

and, o r

a

i m e ,

worked

n

alignment i t h

E l - E r i a n .

Cracks

soon began

o appear n

t h i s

a l l i a n c e ,

however,

s l - E r i a n

sought

t o f o r c e

PIMCO ut

of

t s c o r e

focus

on bonds and

e l a t e d

f i x e d income

e c u r i t i e s

and

n s t e a d

become

a e n e r a l - p u r p o s e

i n v e s t m e n t

management

i r m o f f e r i n g

s t o c k s ,

commodities, e a l

e s t a t e ,

and

hedge fund- l i k e

p r o d u c t s t o

i n v e s t o r s . As ime a s s e d , Mr.

ross

h a r a c t e r i z e d

E l - E r i a n ' s

p l a n

as

i m i l a r t o

t h e

e x t e n s i v e and

a r i e d

men u

t a Cheesecake a c t o r y

r e s t a u r a n t ,

while

i s own

favored approach

was

bonds and

u r g e r s a i m p l e , a s e r

focus

on a

p e c i f i c

type of

e c u r i t i e s

t h a t

had

been

u c c e s s f u l

s i n c e

PIMCO's ounding and

r o v i d e d

s t a b l e r e t u r n s f o r

i n v e s t o r s . In

a c t

i n

t h e

t h r e e

y e a r s

p r e c e d i n g

h i s

d e p a r t u r e ,

Mr.

r o s s ' s

f l a g s h i p

T o t a l

Return

Fund

produced

e t u r n s

t h a t

were

almost double h o s e of h e benchmark

a r c l a y s

US

ggregate

Bond

Index.

26. This was not a

mere

h i l o s o p h i c a l

d i f f e r e n c e between

h e

two

men. Mr.

ross

was

concerned

h a t

PIMCO's

xpansion n t o

new

n v e s t m e n t

f i e l d s

posed

a

a r t i c u l a r

l i a b i l i t y

t o

t h e

company

and

t s

i n v e s t o r s s h o u l d

a n o t h e r

s i g n i f i c a n t e v e n t , such

as h e

c o l l a p s e of

Lehman

B r o t h e r s ,

o c c u r .

This was

of

a r t i c u l a r

concern

because many of

h e new

investment r e a s

f a v o r e d

1044676

5

COMPLAINT


7/37

1

2

3

4

5

6

7

8

9

10

11

12

~

13

~ ` '

14

~

15

16

17

18

19

20

21

22

23

24

25

26

27

28

by l - E r i a n ,

such

a s

t h e

mortgages

and

e v e r a g e d r e a l

e s t a t e

i n v e s t m e n t s b e i n g

l e d by

a

younger

PIMCO

anaging

d i r e c t o r

n a m e d

Dan

Ivascyn were

under

h e c o n t r o l

o f

o r t f o l i o

managers

w h o

were,

o

v a r y i n g

d e g r e e s ,

independent from

t h e PIMCO

nvestment

Committee.

27.

N e v e r t h e l e s s , i n

l i g h t

o f

h e

u l t i m a t e

p l a n

t o

t r a n s i t i o n

r e s p o n s i b i l i t i e s t o

E l - E r i a n

as

a u c c e s s o r ,

Mr.

ross

m a d e an

f f e r

t o

s t e p

back

from

h i s

r o l e

o n

h e

PIMCO

nvestment

.Committee

e l a t i n g

t o m o st of

PIMCO's

nvestment

f f e r i n g s

and

n s t e a d t o

focus

o l e l y

upon

t s

f i x e d

inco m e

e c u r i t y

p o r t f o l i o

t h e v e r y

bonds and

b u r g e r s

approach

h a t he

formed

a nd

f a v o r e d .

As a r t

o f

h i s

o f f e r ,

Mr. Gross

u g g e s t e d

t h a t he

could s t e p

d o w n from

heading

a

o r t i o n

of

PIMCO's

nvestment

Committee n

f a v o r

of l - E r i a n .

28.

Far from

r e s o l v i n g

t h e

d i v e r g e n c e between

Mr. ross

and

E l - E r i a n ' s

v iew of

PIMCO s

i r e c t i o n ,

u n e x p e c t e d l y

a t

l e a s t

t o

Mr. ross

t h i s

p r o p o s a l

prompted

E l - E r i a n t o

t a k e

s t e p

t h a t

w a s

a r

m o r e

d r a s t i c and damaging

o b o t h

PIMCO nd

t s i n v e s t o r

c l i e n t s .

E 1 - E r i a n ,

ev en

though he

w a s co-Chief

nvestment f f i c e r

and Chief

xecutive O f f i c e r o f

PIMCO,

a s angry

and

a p p r e h e n s i v e

a t t h e

i d e a t h a t

he

would have

o

b e a r s o l e

r e s p o n s i b i l i t y

(and

blame)

o r

t h e h i g h

- r i s k

high- f e e

i n v e s t m e n t s

h e

had

expanded

PIMCO

n t o w h i l e

Mr. ross

wou l d

focus h i s own

f f o r t s

o

PIMCO s

i s t o r i c a l bond

b u s i n e s s .

29.

As e s u l t ,

E l - E r i a n

a b r u p t l y

announced

h i s

r e s i g n a t i o n

from

t h e

p o s t s

o f o

-Chief

Investment f f i c e r

and

c o-Chief

x e c u t i v e

O f f i c e r of

PIMCO

nd v o i c e d

h i s

i n t e n t t o

l e a v e

t h e

c o m p a n y n t i r e l y ,

which he d i d

s h o r t l y

t h e r e a f t e r .

C.

Mr.

r o s s a n d

PIMCO n v e s t i g a t e

D a m a g i n g

Press

L e a k s

30.

Following

E l - E r i a n ' s a b r u p t r e s i g n a t i o n ,

PIMCO

orked

o

c o n t a i n

t h e

i n t e r n a l

f a l l o u t

and a l l o w

t h e

c o m p a n y

h e time

o

handle

l i e n t

n o t i f i c a t i o n s

a s w e l l

a s , i f

p o s s i b l e , t o

s e l e c

a

replacement Chief xecutive

O f f i c e r .

31.

PIMCO

ished

t o ha v e

E l - E r i a n

remain

f f i l i a t e d w i t h

t h e

c o m p a ny

n

a

nominal

c a p a c i t y u n t i l

t h e

end

o f

Maxch 2014.

Doing

s o ,

PIMCO oped,

wou l d

g i v e

i t t h e

time

t needed

t o

p r e p a x e

i n v e s t o r s

f o r

t h e news,

nd

o t h e r w i s e l i m i t t h e

d a m a g e

o

i t s

b u s i n e s s

and

p u b l i c

r e p u t a t i o n

t h a t

E l - E r i a n ' s

d e p a r t u r e wou l d

a u s e .

1044676

6

COMPLAINT


8/37

32.

Although

PIMCO

ould

c o n c e a l

E 1 - E r i a n s


from

i n v e s t o r s and

t h e

p r e s s ,

2

i t

could

not c o n c e a l

t h i s i n f o r m a t i o n from

t s own anaging

d i r e c t o r s . I t

t h e r e f o r e

announced

El-

3

E r i a n s r e s i g n a t i o n

d u r i n g a

January 20, 2 014

meeting of managing

d i r e c t o r s . I t

s t r o n g l y

warned

4

t h a t

no

l e a k

o f

h i s

i n f o r m a t i o n

t o

t h e

media

c o u l d

be

a l l o w e d .

5 33. Unkno w n

o

PIMCO

r

Mr.

r o s s ,

e s s

t h a n

t w o hours

a f t e r

t h e

meeting

a d j o u r n e d ,

6

PIMCO

anaging

d i r e c t o r

A n d rew

B a l l s , who as p r e s e n t f o r

t h e

announcement

e g a r d i n g

El

-

7

E r i a n ,

p l a c e d

a

a l l t o

a e p o r t e r

a t t h e F i n a n c i a l

T i m e s , t h e newspaper

f o r

which

B a l l s

had

8

p r e v i o u s l y

worked. Two

ays

l a t e r ,

t h e

F i n a n c i a l

Times

broke t h e s t o r y , l a y i n g

t h e

f a u l t

f o r El-

9

E r i a n s a b r u p t


a t

Mr.

r o s s s f e e t

and

p o r t r a y i n g

E l - E r i a n s e x i t

a s t h e

r e s u l t

of Mr.

t o

G r o s s s p e r s o n al

conduct a t

PIMCO

h e n n

f a c t t h e r e a s o n f o r

E l - E r i a n s

d e p a r t u r e

wa s

Mr.

1 1

G r o s s s s u g g e s t i o n

t h a t

he c o u l d s t e p

d o v ~ m from

heading a

p o r t i o n

of

PIMCO s

Investment

1 2

Committee a f t e r e x p r e s s i n g

h i s

disagreement

w i t h

E l - E r i a n s

f a v o r i n g

new

n v e s t m e n t

a r e a s s u c h

a

~

13

t h e mortgages

and

l e v e r a g e d

r e a l

e s t a t e

i n v e s t m e n t s and h i s s u p p o r t f o r

t h e s e

a r e a s

remaining

~ '

1 4

independent from

t h e PIMCO

nvestment

Committee

and h i s

anger and

a p p r e h e n s i o n

over h e

i d e a

5

t h a t h e

wo u l d

have t o b e a x s o l e

r e s p o n s i b i l i t y (and blame) o r t h e

h i g h

- f e e


he

h ad

16

promoted

a t

PIMCO.

1 7

34. Both

t h e i n i t i a l

F i n a n c i a l Times a x t i c l e and

numerous o l l o w - u p

media

p i e c e s heape

1 8

p r a i s e on E l - E r i a n and

c a s t c r i t i c i s m o n

Mr. r o s s .

Glossed o v er—or even

l e f t

e n t i r e l y

19

unmentioned

wa s

any

c o m m e n t o n E 1 - E r i a n s a b r u p t

d e p a r t u r e from

a

c o mp a n y

h a t he

h ad been

20

h i r e d t o

e v e n t u a l l y

l e a d , o r o f

l - E r i a n s

abysmal

performance o n

managing

h i s

PIMCO

und. Als

2 1

l e f t

out

wa s h e

c o m p a r a t i v e f a c t t h a t I n f a c t , i n

t h e

t h r e e

y e a r s p r e c e d i n g

h i s

d e p a r t u r e ,

Mr.

r o s s s

2 2

f l a g s h i p

T o t a l

Return

F u n d produced s t e l l a r

r e t u r n s

r e t u r n s t h a t were

almost

double t h o s e o f

h e

2 3

benchmark

B a r c l a y s

US ggregate

B o n d

I n d e x .

24

3 . These

s t o r i e s were f u e l e d

by

a d d i t i o n a l

l e a k s

and

u n a t t r i b u t e d

commentary

from b o t

25

B a l l s and E l - E r i a n

h i m s e l f .

B a l l s undertook t h e s e c l a n d e s t i n e

a c t i o n s

d e s p i t e

knowing

t h a t

t h e

26

p u b l i c a i r i n g

o f h e

c l a s h

between

E l - E r i a n

and Mr.

Gross,

s p e c i a l l y i n

a

l i g h t s o

n e g a t i v e

t o

t h e

27

i n d i v i d u a l

remaining a t

PIMCO,

o u l d

be e x t r a o r d i n a r i l y

harmful o

both

Mr.

r o s s s

p e r s o n a l

28

r e p u t a t i o n

and

h i s

a b i l i t y

t o

perform

h i s d u t i e s

as

PIMCO s

Chief

Investment

O f f i c e r .

7

COMPLAINT

1044676


9/37

1

2

3

4

5

6

7

8

9

10

11

. ~ r

12

~

13

~ 14

Q~

5

16

17

18

19

20

21

22

23

24

25

26

27

28

36.

On ebruary

24,

h e

Wall

t r e e t

Journal ran a n

a r t i c l e

e n t i t l e d I n s i d e t h e

Showdow

Atop PIMCO,

h e

World's

B i g g e s t Bond Firm.

As h e a r t i c l e

quoted

d i r e c t l y

fr o m

arguments t h a t

had

o c c u r r e d

between

Mr . Gross a nd E l - E r i a n ,

t b e c a m e

c l e a r

t o Mr .

Gross and

o t h e r s

a t PIMCO

t h a t

t h e s o u r c e

o f

h e l e a k s

was a

m e m b e r

of

v e r y s e l e c t

group

p r i v y

t o

m u ch o f

h e

d i s p u t e

between

M r .

Gross and

E 1 - E r i a n

and

who

n t e n d e d

t o s e l e c t i v e l y

d i s c l o s e i n f o r m a t i o n

p r e s e n t i n g

E l

E r i a n

i n

a

p o s i t i v e

l i g h t

and Mr .

Gross

n

a e g a t i v e

l i g h t

t h a t

was damaging

t o M r .

Gross a nd

PIMCO

t s e l f In

o t h e r

words,

h e i n d i v i d u a l

who e c i d e d t o

l e a k

i n f o r m a t i o n

t o t h e p r e s s

t o harm

M r . Gross and

PIMCO a s

h i g h l y

p l a c e d

a t

PIMCO,

nd

p r i v y

t o s o m e o f

t s h i g h e s t

- l e v e l , m o s t

s e n s i t i v e

d i s c u s s i o n s — d i s c u s s i o n s t h a t were

now p p e a r i n g i n

t h e p r e s s i n h e a v i l y

a l t e r e d forms

d e s i g n e d t o

harm

Mr .

r o s s .

37. In o r d e r t o

uncover

t h e s o u r c e

o f h e s e ongoing

l e a k s ,

D o u g

Hodge,PIMCO's n e w

Chief

xecutive

O f f i c e r ,

and

Jay

J a c o b s ,

PIMCO's r e s i d e n t ,

b e g a n

a n

n v e s t i g a t i o n .

A f t e r

a w e e k

s p e n t

checking

t h e

phone

r e c o r d s

o f

PIMCO a n d l i n e s and

c e l l

phones

t u r n e d

u p

n o t h i n g ,

PIMCO'

i n v e s t i g a t o r s then checked t h e

r e c o r d s

f o r

a second,

i t t l e

- u s e d c e l l phone

s s u e d

t o

B a l l s .

They

demonstrated

t h a t

t h i s

phone had

been

used t o m a k e m a d e n u m e r o u s

a l l s t o t h e F i n a n c i a l

Times

n

J a n u a r y ,

as

w e l l

as

t o

t h e

Wall

t r e e t

Journal

n t h e days

b e f o r e

t h e

F e b r u a r y

24

r t i c l e .

3 .

M r . Gross,

l o n g w i t h

Hodge,

acobs

and

PIMCO s

e n e r a l c o u n s e l

David

F l a t t u m ,

c o n f r o n t e d B a l l s . B a l l s

i n i t i a l l y

d e n i e d a n y t h i n g o t h e r

than a

r i e n d l y

c o n v e r s a t i o n

w i t h t h e

r e p o r t e r s .

A f t e r

d i s c u s s i o n s

w i t h

h i s p r i v a t e a t t o rn e y ,

however,

a l l s

changed h i s

s t o r y

a nd

a d m i t t e d

i n

a s i g n e d

s t a t e m e n t t h a t

he

had spoken t o

both r e p o r t e r s o n

b e h a l f of l - E r i a n

r e g a r d i n g

the c i r c u m s t a n c e s

o fMr

l - E r i a n ' s

r e s i g n a t i o n ,

and

then

r e p o r t e d back

t o E l - E r i a n

t h e

s u b s t a n c e

o f h e s e c a l l s .

B a l l s

f u r t h e r

a d m i t t e d

t h a t he

d i d

not

inform

a ny

o t h e r

i n d i v i d u a l s a t

PIMCO

i t h e r

b e f o r e

o r

a f t e r

t h e

c a l l s

o r

o t h e r w i s e o b t a i n

t h e

compa ny ' s

p e r m i s s i o n

f o r h i s

s t a t e m e n t s .

39. D e s p i t e t h i s

c o n f e s s i o n ,

Hod g e

and

Jacobs

d i d

not

s e e k

t o

t e r m i n a t e

B a l l s o r

o t h e r w i s e

punish

him

f o r l e a k i n g

f a l s e i n f o r m a t i o n i n

a n

e f f o r t t o

harm

M r . Gross

and

PIMCO.

I n s t e a d ,

they

allowed

B a l l s t o s i g n a h i g h l y m i s l e a d i n g

s t a t e m e n t

a d m i t t i n g only

t o

p r o v i d i n g

very

g e n e r a l i n f o r m a t i o n

t o t h e

two newspapers, and

c o n c e a l i n g t h e

f a c t

t h a t

B a l l s ' s t r u e

conduct

was a

1044676

8

COMPLAINT


10/37

more

e r i o u s ,

c a l c u l a t e d , and e f a m a t o r y .

They

would

u b s e q u e n t l y

u s e

t h i s

s t a t e m e n t

t o

m i s l e a d

2

o t h e r s a t

PIMCO

e g a r d i n g

t h e

t r u e

e x t e n t of

a l l s ' s

misconduct.

3 40. A f t e r

B a l l s ' s c o n f e s s i o n ,

he f f e r e d

t o

r e s i g n

from

PIMCO Mr.

Gross urged h a t

t h

4

company

c c e p t

B a l l s ' s r e s i g n a t i o n

but

wa s

v e r r u l e d

b y

Hodge

and

J a c o b s .

They

argued

h a t

B a l l

5 w a s

o o i m p o r t a n t t o

PIMCO

t

t h a t momen t

and h a t t

would be

b e t t e r

t o

w a i t u n t i l l a t e r i n

t h e y e a

6 when

i s e x i t would

cause

e s s

d i s r u p t i o n

t o

t h e company.

7

41. S e c r e t l y ,

however,

Hodge

and

Jacobs

began

o

a l i g n

a g a i n s t

Mr.

r o s s . In a d d i t i o n

8 t o

p r e p a r i n g

t h e

s i g n e d s t a t e m e n t t h a t

covered

up

a l l s ' s t r u e

misconduct, h e

two

t r u c k

a

u r t h e r

9 d e a l

w i t h

B a l l s w i t h o u t i n f o r m i n g t h e

E x e c u t i v e

Committee

r

t h e

P a r t n e r s

Compensation

o

Committee.

Mr.

ross a t on both

committees.

I n

exchange o r

B a l l s ' s

s i l e n c e r e g a r d i n g

t h e

l e a k s

11

and h e t r i o ' s

e f f o r t s

t o cover

up h e i r

s o u r c e and

e x t e n t ,

PIMCO ould

a g r e e t h a t

B a l l s

would

not

i 2

b e e r m i n a t e d . I n

e f f e c t ,

Hodge and

Jacobs chose

o

s i d e

w i t h

t h e p e r s o n

who

had

undermined

Mr.

t ~ '

13

Gross and

PIMCO

n

p u b l i c .

~ '

1 4

42.

Nor

would

h i s b e

h e

l a s t

t i m e .

S h o r t l y

t h e r e a f t e r ,

Mr.

ross r

ed h e

E x e c u t i v e

4 ~ g

1 5

Committee

o e i t h e r immediately

u l l y t e r m i n a t e E 1 - Er i a n o r ,

f a i l i n g t h a t ,

a t

l e a s t den

him

a

o r t i o

Y p

16

of i s

$50

i l l i o n

bonus

o r

t h e f i r s t q u a r t e r

of2014.

This

would be

a

consequence of h e

damagin

1 7

l e a k s committed on

l - E r i a n ' s

b e h a l f

and, Mr. Gross

u s p e c t e d ,

w i t h

E l - E r i a n ' s

involvement.

The

1 8

Executive

Committee denied b o t h

r e q u e s t s

and

e a c t e d w i t h

h o s t i l i t y

toward Mr.

r o s s ' s

19

u n w i l l i n g n e s s

t o a i d

PIMCO's oncealment of h e

l e a k i n v e s t i g a t i o n

and

n f o r m a t i o n

r e g a r d i n g

t h e

20

c i r c u m s t a n c e s of

1 - E r i a n ' s

d e p a r t u r e .

At

one

p o i n t ,

Hodge u l l e d

Mr.

Gross

s i d e

i n t o

a e p a r a t e

2 1

room

and

warned him

d a r k l y I

could

f i r e

you, you

know.

22

D

PIMCO xecutives

Begin o Plot

o Oust

Mr

ross

23 43.

The

u r m o i l s u r r o u n d i n g

E l - E r i a n ' s

d e p a r t u r e

p r o v i d e d

f e r t i l e

cover

o r

i n d i v i d u a l s

24

s e e k i n g

t o o u s t

Mr.

ross

from

PIMCO

o r

t h e i r

own e r s o n a l

f i n a n c i a l

b e n e f i t

and

e g o s .

25

44.

Foremost

amo ng

h e s e

i n d i v i d u a l s

wa s v a s c y n ,

who

a n

t h e

a l t e r n a t i v e

a s s e t s

26


f o r

PIMCO

The

funds

managed b y Ivascyn focused on

i g h l y

l e v e r a g e d


27

such

as mortgages, ommercial

e a l

e s t a t e and p r i v a t e

e q u i t y

f u n d s .

28

9

COMPLAINT

1044676


11/37

1

2

3

4

5

6

8

9

10

11

17

18

19

20

21

22

23

24

25

26

27

28

45.

Unusually

o r

PIMCO, vascyn

wa s

not a r t

o f

h e

Investment

Committee

but a t h e r

o p e r a t e d

h i s

o v u m

funds and

investment

o o l s a s

a

e r s o n a l fiefdom

l a r g e l y

d i s c o n n e c t e d from

h e

b r o a d e r

co mpany.

46.

The

n v e s t m e n t

o f f e r i n g s

u n d e r I v a s c y n

c a r r i e d h e f t y ,

hedge

- f u n d

l i k e

f e e s , y p i c a l l

c h a r g i n g

i n v e s t o r s

n o t

o n l y a s m u c h

s

20

f

l l

i n v e s t m e n t

r e t u r n s ,

b u t

a l s o

skimming

f f

a s

m u c h

s

2

f

l l

a s s e t s under

m a n a g e m e n t

a c h

y e a r ,

r e g a r d l e s s of

e r f o r m a n c e . T h i s

was

a r

i n

e x c e s s

of

IMCO's

y p i c a l

f e e o f 0

a s i s p o i n t s i .

. ,

j u s t o n e - h a l f a

e r c e n t ) .

47.

These t e e p

f e e s ,

c o u p l e d

w i t h

t h e

r e c o v e r y o f

h e

m a r k e t s a f t e r

t h e G r e a t

Recession

o f

007,

e s u l t e d i n I v a s c y n

b e i n g

r e s p o n s i b l e fo r

t h e

g e n e r a t i o n of

undreds

of

i l l i o n s

of

o l l a r s

i n

f e e s

each

y e a r

f o r PIMCO

nd

were a

i g n i f i c a n t c o n t r i b u t i o n

t o

t h e

company's

bottom

l i n e .

I v a s c y n

used h a t

f i n a n c i a l

p e r f o r m a n c e

t o

s e c u r e

a

e a t o n

h e

PIMCO

a r t n e r s

Compensation

Committee.

48.

D e s p i t e

t h e

e n o r m o u s s u m s

PIMCO eaped from

v a s c y n s h i g h

- f e e

investment

v e h i c l e s , t h e

s t r u c t u r e

o f

h e

$1.3

b i l l i o n

PIMCO o n u s pool

i d not

p e c i f i c a l l y

a l l o c a t e

p r o f i t

t o

t h e

v a r i o u s

b u s i n e s s

u n i t s

such as

v a s c y n s .

As

consequence,

vascyn

s aw

i s

s h a r e

o f

h e

p r o f i t

pooled

with

o t h e r

b u s i n e s s

u n i t s p r o f i t s .

49. Much o

I v a s c y n s

c h a g r i n ,

h i s

a l s o m e a n t h a t

h i s

annual

b o nus

was

drawn fro m

h

s a m e

pool

as

e n i o r

e x e c u t i v e s ,

l i k e Mr. ross,

who ad

g u a r a n t e e d

compensation

arrangements

with

PIMCO.

As e s u l t ,

Ivascyn

b e l i e v e d

t h a t PIMCO

a s paying

Mr.

ross e n s o f

i l l i o n s o f

d o l l a r s t h a t

should

hav e n s t e a d

g on e o

I v a s c y n .

50.

C o n s e q u e n t l y ,

s h o r t l y

a f t e r g a i n i n g

h i s

s e a t ,

I v a s c y n

began

u b l i c l y

l o b b y i n g

t h e

P a r t n e r s

Compensation

Committee o r

a

a r

l a r g e r

s h a r e o f

h e b o nus

o o l .

I v a s c y n

a l s o

began

o

u r g e

t h a t ,

c o n t r a r y t o

PIMCO's

e c a d e s

- o l d

s t r u c t u r e ,

compensation

h o u l d

be

l l o c a t e d

o n

h e

b a s

of

ach n v e s t m e n t

a r e a s r e l a t i v e

p r o f i t .

C o n v e n i e n t l y , h a t

m o v e

would

e s u l t i n

f a r

l a r g e r

s u m s

b e i n g

p a i d t o

I v a s c y n

h i m s e l f .

5 1 .

S i m u l t a n e o u s l y ,

I v a s c y n

began

a

campaign

o be n a m e d

h e

n e x t

PIMCO

hief

Investment f f i c e r , a

m o v e h a t Mr.

ross opposed

due

o

I v a s c y n s

l a c k of

x p e r i e n c e

o u t s i d e

h i s

s p e c i f i c

i n v e s t m e n t

f i e l d .

I v a s c y n s r e s p o n s e

was o warn Mr.

ross

and

o t h e r s t h a t

he

wasn't

a

10

COMPLAINT

1044676


12/37

1

2

3

4

5

6

7

8

9

10

11

12

13

~ ' 14

5

16

17

18

19

20

21

22

23

24

25

26

27

28

long term

p l a y e r and

t h a t

i f

he

d i d

not

m m e d i a t e l y

r e c e i v e what he

b e l i e v e d

was

i s

due he

wou ld

not

remain

a t

PIMCO

52.

As h e s e

c o m p l a i n t s and p r e s s u r e s kept mounting,

v a s c y n

h a t c h e d a

p l a n

t o

o u s t

Mr

Gross

fr om

PIMCO

Doing

so

would

remove

an

e x e c u t i v e

p h i l o s o p h i c a l l y

opposed

t o I v a s c y n ' s

h i g h

- r i s k , h i g h - f e e

i n v e s t m e n t

model,

r e a t e an opening

f o r

a

n e w Chief

n v e s t m e n t

O f f i c e r ,

and,

most

m p o r t a n t l y

t o I v a s c y n , r e e

up a

i g n i f i c a n t p o r t i o n o f

h e

bonus

pool

o be

a l l o c a t e d by

h e

P a r t n e r s Compensation

Co mmittee

o n which

he

s a t .

53.

I v a s c y n

found

an

a l l y

i n

t h e

s i m i l a r l y

m o n e y

- d r i v e n

B r e n t

H a r r i s ,

w h o

was

n

c h a r g

o f

PIMCO s

mutual

fund

complex,

h e T o t a l

Return

Fund f e e s ,

and n e w

n v e s t m e n t

p r o d u c t s .

H a r r i s

was p a r t i c u l a r l y

proud o f

i s

e f f o r t s

t o

r a i s e

t h e a n n u a l

f e e s o n

v a r i o u s

f u n d s ,

such

a s t h e

T o t a l Return

Fund, h r o u g h c r e a t i v e l y

l a b e l i n g such

f e e s

a d m i n i s t r a t i v e

c o s t s .

54.

H a r r i s '

f o c u s

o n r a i s i n g

f e e s

p a i d

by n v e s t o r s ,

and

t h e

p r o f i t t h a t

g e n e r a t e d ,

l e d t o

c o n f l i c t

w i t h

Mr.

r o s s ,

w h o

a c c u r a t e l y

r e c o g n i z e d t h a t a c t i v e l y

manag ed funds such

a s

t h e

T o t a l

Return

Fu n d

were

b e g i n n i n g

t o f a c e f e e

p r e s s u r e fr om

l e s s

e x p e n s i v e , p a s s i v e l y

manag ed

f u n d s .

Although

M r .

Gross b e l i e v e d t h a t

a c t i v e

m a n a g e m e n t o f

unds had

t h e

p o t e n t i a l

t o

d e l i v e r

v a l u e t o

i n v e s t o r s

r e l a t i v e t o p a s s i v e

i n d e x

t r a c k e r s

d e s p i t e t h e added

c o s t s o f

manage m e nt , h e

n e v e r t h e l e s s

r e c o g n i z e d

t h e

c o m p e t i t i v e p r e s s u r e

p a s s i v e

m a n a g e m e n t

r e s e n t e d .

H a r r i s ,

however,

ook

Mr .

G r o s s ' s

s u g g e s t i o n t h a t

he

b e g i n

c o n s i d e r i n g

r e d u c i n g f e e s

a s

tantamount

o a

d i r e c t ,

p e r s o n a l

a t t a c

o n

H a r r i s ' o n g o i n g

f i n a n c i a l

b e n e f i t f r o m

PIMCO n d prompted

H a r r i s

t o b e c o m e

one

o f

h e

most

v o c a l

s u p p o r t e r s f o r

o u s t i n g

Mr.

r o s s .

55.

I v a s c y n

and H a r r i s

wou ld

r e c r u i t

o t h e r

a m b i t i o u s

PIMCO

x e c u t i v e s

w h o

s t o o d

t o

g a i n

fr om an

u p h e a v a l ,

such

a s

PIMCO s i r e c t o r o f n e w

p r o d u c t s

W e n d y

C u p ps

and

J a c o b s

h i m s e l f .

E.

Mr

ross

s Forced

f r o m

PIMCO

56.

S e n s i n g

t h a t

Mr.

r o s s ' s

r e l a t i o n s h i p

w i t h

PIMCO as

a t

a i p p i n g

p o i n t

and

e a g e r

t o

e x p l o i t t h e

o p p o r t u n i t y f o r

t h e i r

own i n a n c i a l

g a i n ,

I v a s c y n

and h i s

c o - c o n s p i r a t o r s ,

n c l u d i n g

J a c o b s , Cupps, and o t h e r s ,

informed

PIMCO

h a t

i f

Mr .

Gross

were

n o t d r i v e n

fr om

t h e

c ompa ny,

t h e y

wou ld r e s i g n .

1044676

1 1

COMPLAINT


13/37

1 57. Forced i n t o a o r n e r

by h e

t h r e a t

o f

e s i g n a t i o n s and

m o r e

m p o r t a n t l y t o

Mr.

Gross

2

t h e p o t e n t i a l

damage

h a t t h e s e

r e s i g n a t i o n s

o r

t h e p u b l i c t h r e a t

t h e r e o f

c o u l d c a u s e

t o

PIMCO nd

3

i t s

i n v e s t o r s ,

Mr.

Gross began

t o n e g o t i a t e a d e a l i n which

he would r e s i g n

from

t h e

p o s t o f

Chief

4

Investment O f f i c e r .

Mr.

Gross

would be


f o r

t h e

f i x e d

income

s e c u r i t i e s and

l e a v e

t h e

5

management

o f

h e o t h e r

i n v e s t m e n t v e h i c l e s

t o h i s s u c c e s s o r s

a s

Chief

nvestment O f f i c e r

6

Ivascyn and Mihir Worah.

7 5 Ivascyn and

t h e

o t h e r

c o n s p i r a t o r s

had

been

a b l e

t o

s p r i n g t h e i r

t r a p .

Th e

E x e c u t i v e

8

Committee,

omposed

of

h o s e w h o

s t o o d

t o b e n e f i t t h e most,

both

f i n a n c i a l l y and

i n

pow er w i t h i n

9 PIMCO, a t c h e d t h e i r p l a n

t o

o u s t

PIMCO s

founder

and l e a d i n g

f i x e d income

i n v e s t o r

f o r

over

1 o

f o u r

d e c a d e s . They t i l l ,

however,

had

t o g e t

A l l i a n z ,

t h e

owner

o f

PIMCO,

n

board w i t h

t h i s

i l l i c

11

p l a x l .

, , , , 1 2

59.

Over h e

next

few d a y s ,

h e

E x e c u t i v e Committee

c o n t i n u e d

d i s c u s s i o n s w i t h

Mr .

1 3

Gross

n

o r d e r

t o

l e a d

him t o b e l i e v e t h a t

a workable

arrangement

was

t i l l

p o s s i b l e .

~

1 4

60. Michael

Diekmann,

h e

Chief

x e c u t i v e

O f f i c e r

of

l l i a n z ,

was

e r s o n a l l

comin

t

Q ~

p

Y

g

1 5

C a l i f o r n i a o s t e n s i b l y

t o

r e s o l v e t h e d i s p u t e

w i t h

Mr.

r o s s . I n

advance

o f

i s a r r i v a l ,

M r .

Gross,

' ~ .

1 6

Jocquim F a b e r ,

h e former

head

of

l l l a n z Global

I n v e s t o r s

and

~PIMCO s u l t i m a t e

p a r e n t

company

i

7

and B i l l

Thompson, h e former

PIMCO

hief

x e c u t i v e O f f i c e r ,

me t and

o u t l i n e d

a p l a n

t h a t

was,

1 8

f o r a l l

i n t e n t s and

p u r p o s e s ,

an

o u t l i n e

f o r t h e

t r a n s i t i o n of M r .

r o s s s

c a r e e r

a t

PIMCO.

1 9

61.

Under

h e p l a n ,

M r . Gross a g r e e d t h a t he would

r e s i g n

as

Chief

nvestment

O f f i c e r ,

20

a s Chairman of

h e

Investment

Committee, and

as

a

m e m b e r

of

both t h e

E x e c u t i v e

Committee

an d

2 1

t h e

P a r t n e r s Compensation

Committee. To p r e v e n t t h e f i r m

he founded

from

going i n t o

t o t a l

chaos

22

and

a

downspin,

u r t i n g

i t s i n v e s t o r s

i n

t h e

p r o c e s s , M r .

Gross a l s o

a g r e e d t o

have h i s

annual

bonus

23

c u t

by

h a l f o r

mor e

n

o r d e r

t o

p l a c a t e

t h e

PIMCO anaging

d i r e c t o r s

w h o

were

s e e k i n g

t o

e n s u r e

24

t h a t they r e c e i v e d

a

a r g e r

s h a r e

o f

h e company s

p r o f i t s

f o r

t h e m s e l v e s .

25

62.

M r .

Gross

even

a g r e e d

he

would

c e a s e

a l l

management o f h e

PIMCO

o t a l

Return

26

Bon d

Fu n d t h a t he

had b u i l t and would

i n s t e a d be handed c o n t r o l

of a

p o r t f o l i o

t h a t

was

e s s t h a n

27

10

n

s i z e

o f

i s

then- c u r r e n t

a s s e t s

under

management.

28

1 2

COMPLAINT

1044676


14/37

63. And he

a g r e e d t o what

he c o n s i d e r e d

f u r t h e r

h u m i l i a t i o n : Mr.

Gross

would be

b a r r e d

2

from

t h e

PIMCO f f i c e s , and

l e f t

t o

h a n d l e

t h e remaining

p o r t f o l i o

from

a n o t h e r

o f f i c e

s e p a r a t e and

3

away from

PIMCO's.

4

64. T h i s

p l a n

s t r i p p e d

Mr.

Gross

o f

power,

o s i t i o n ,

and

c o m p e n s a t i o n .

N e v e r t h e l e s s ,

5

Mr.

Gross b e l i e v e d

i t

would be

b e t t e r

f o r

PIMCO

nd

t s i n v e s t o r s t h a n

t h e

a l t e r n a t i v e o f

a

6 p r o t r a c t e d

f i g h t

am ong

PIMCO's e a d e r s h i p . A d d i t i o n a l l y ,

t a l l o w e d

h i m

t o

r e t u r n

t o bond

7

i n v e s t i n g , r e e o f

h e

b a t t l e s

w i t h

p e o p l e l i k e I v a s c y n ,

H a r r i s

and

E l - E r i a n

w h o

s o u g h t

t o

t r a n s f o r m

8

PIMCO

n t o

a h i g h - r i s k ,

h i g h

- f e e

f u l l s e r v i c e

i n v e s t m e n t

f i r m .

9 65. A f t e r e - m a i l

and

t e l e p h o n e

d i s c u s s i o n s ,

Faber

c a l l e d

Diekmann and informed h i m

o f

o

t h e outcome o f

h e d i s c u s s i o n and

Mr. r o s s ' s agreement

o t h e

p r o p o s a l .

Diekmann

a r r i v e d

i n

1 1

C a l i f o r n i a t h a t e v e n i n g .

„ ~ , _ , , 1 2

66.

The n e x t

morning,

o n o r

a b o u t

September

18,2014,

Diekmann met

Mr.

Gross

o r

. . . .

•

«

1 3

b r e a k f a s t .

Over

c o f f e e , Diekmann o r m a l l y

o f f e r e d Mr.

Gross

h e

same

p l a n

t h a t

had

been

worked

~ ' ' 1 4

out

n t h e

p r i o r

d a y ' s m e e t i n g . Diekmann

c a l l e d

t h i s p l a n a s i d e c a r

i n

o r d e r

t o

em

h a s i z e

t h a t

Q~ p

1 5

w h i l e Mr.

Gross would be o p e r a t i n g

more n d e p e n d e n t l y ,

he would

t i l l be

c l o s e l y

l i n k e d

t o

PIMCO

1 6

and

headed

i n

t h e

same

d i r e c t i o n .

Mr. Gross

a c c e p t e d

Diekmann's f f e r .

1 7

67. Following

b r e a k f a s t ,

t h e

two

men

a g r e e d

t o

meet

a g a i n a t noon.

Diekmann

e f t t o

1 8

meet w i t h

Hodge and

J a c o b s t o e n s u r e

t h a t

PIMCO

wholly

owned by A l l i a n z

and

t h u s s u b j e c t

t o

1 9

Diekmann's c o n t r o l

a s A l l i a n z ' s

Chief

x e c u t i v e

O f f i c e r

a g r e e d t o

t h e p l a n .

20

68.

N o t w i t h s t a n d i n g

Diekmann's agreement,

Hodge,

a c o b s

and t h e

o t h e r

PIMCO

2 1

e x e c u t i v e s

s o m e h o w

o v e r r u l e d

t h e Chief

x e c u t i v e

O f f i c e r

o f

l l i a n z and

f o r c e d Diekmann

o

22

r e n e g e

o n

h i s agreement

w i t h Mr.

r o s s .

2 3 69.

Thus,

t

noon

o n

Septemb er 25,

2014,

Mr.

Gross

e n t e r e d

what

would be

h i s

l a s t

24

meeting a t

PIMCO Diekmann, f t e r

b e i n g

s t r o n g - a x r n e d

by

h i s

s u b o r d i n a t e s ,

i m m e d i a t e l y

y i e l d e d

2 5

t h e f l o o r

t o Hodge.

26

70.

Hodge proceeded

t o o u t l i n e an e n t i r e l y

d i f f e r e n t

r o l e f o r

Mr.

Gross

h a n

t h e one

h a t

2 ~

Diekmann had

a g r e e d

t o j u s t

h o u r s

b e f o r e and t h a t Mr.

Gross had p r e v i o u s l y

n e g o t i a t e d and

a g r e e d

2 8

t o

w i t h

Faber

and

Thompson.

1 3

COMPLAINT

1044676


15/37

1

2

3

4

5

6

7

8

9

10

11

. ~ .

12

13

~ ' 14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

71.

Hodge's s o - c a l l e d s o l u t i o n

e f f e c t i v e l y

was

Mr.

r o s s ' s

t e r m i n a t i o n

from

PIMCO,

but

drawn

out n

a way h a t

PIMCO ould c o n c e a l

t h e news from

i n v e s t o r s , t h e

p r e s s , and t h e

maxket e n e r a l l y .

Hodge e x p l a i n e d t h a t Mr.

Gross would

b e

allowed o

remain a t

PIMCO

through

December

2014.

72.

Mr.

Gross was

o l d t h a t i f

he d i d

n o t a c c e p t

t h i s

new

p r o p o s a l , h e

would

be

t e r m i n a t e d

from

PIMCO

m m e d i a t e l y .

73. Mr.

Gross could

not a g r e e

t o

p a r t i c i p a t e

i n

t h i s d e c e i t

on

n v e s t o r s and

t h e

p u b l i c by

a c c e p t i n g

t h i s s o - c a l l e d

o f f e r of

i s

e f f e c t i v e t e r m i n a t i o n .

As e s u l t , h e

was o r c e d

out of

h e

company he

had

founded

and l e d f o r

over 40 e a r s r a t h e r

than

p a r t i c i p a t e

i n

t h e

d e c e i t

an d

d i s h o n e s t y t h a t

had been

o u t l i n e d ,

t o say n o t h i n g

of enduring

t h e

h u m i l i a t i o n

PIMCO

ad

planned

f o r

him.

The

PIMCO o n us Pool

74.

PIMCO

s t a b l i s h e d

and

p r o v i d e s a p r o f i t - s h a x i n g

p l a n

f o r

i t s managing

d i r e c t o r s .

The c o n t o u r s of

h i s

p r o f i t - s h a r i n g o r

bonus pool

p l a n a r e

governed b y

h e

Amended

and

R e s t a t e d

P a c i f i c

Investment

Management

Company

LLCNon- Q u a l i f i e d

P r o f i t

S h a r i n g

Plan

d a t e d

as

of

January 1 ,

2012

the P l a n ) .

A

r u e and c o r r e c t

copy

of

h a t

c o n t r a c t

i s

a t t a c h e d

h e r e t o

a s

E x h i b i t

1 .

75.

Under h e P l a n ,

Mr.

Gross

was n t i t l e d t o r e c e i v e

20

f h e

e n t i r e

p r o f i t s h a r i n g

bonus pool

each

y e a r .

Thus, o r

example, n

2013

h e p r o f i t s h a r i n g

bonus

p o o l

t o t a l e d

$ 1 . 3 b i l l i o n

and Mr. Gross

r e c e i v e d

$300

m i l l i o n

over h e

c o u r s e of

h a t

y e a r .

76.

Th e

Plan

p r o v i d e s

f o r

p r o f i t s h a r i n g

payments o be

made

o

PIMCO's managing

d i r e c t o r s on

a

u a r t e r l y

b a s i s . The q u a r t e r s

f o r

w hic h

PIMCO's

managing

d i r e c t o r s

e a r n

bonuses

a r e

c a l e n d a r

q u a r t e r s ,

and

t h e

r e l e v a n t

c u t o f f d a t e s a r e

March

31, June

3

, September

3

nd

December

31.

77. For

2014,

Mr.

Gross was

on t r a c k

t o

r e c e i v e a

bonus

n

e x c e s s

of

a p p r o x i m a t e l y

$250

m i l l i o n .

Although

bonuses

were p a i d

q u a r t e r l y ,

they were

weighted

more

h e a v i l y

towards

h e

end

of

h e y e a r with

t h e

m a j o r i t y of h e

bonus

pool money

being

d i s t r i b u t e d

i n

t h e

t h i r d and

f o u r t h

q u a r t e r s .

In

t h e f i r s t

two

q u a x t e r s

of2014

Mr.

Gross

r e c e i v e d

bonuses

of

p p r o x i m a t e l y

$16

14

1044676

COMPLAINT


16/37

1

2

3 .

4

5

6

7

8

9

10

11

„ ~ 12

. .

13

~ ' '

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

m i l l i o n .

He

as

l s o

informed h a t he

c o u l d

expect

$80

i l l i o n

as i s

t h i r d

q u a r t e r

bonus

payment

s c h e d u l e d

f o r

September 3

, 014

i t h

t h e

remainder

o

be

p a i d

a t

t h e

f o u r t h

q u a r t e r .

78. Mr.

Gross

was

o r c e d

out

o f

PIMCO n

September

25,

014

m e r e

days

e f o r e t h e

t h i r d q u a r t e r

ended

o n

September

30.

On

eptember 29, 014,

Mr.

r o s s ' s a t t o r n e y

wrote

o

Flattum

s e e k i n g

a s s u r a n c e s t h a t

PIMCO

o ul d

t

l e a s t pay h e

bonus h a t

Mr.

ross had

a r n e d f o r

t h e

t h i r d

q u a r t e r .

Nearly

a m o n t h a t e r ,

o n

October

20,

014,

PIMCO's

awyers

e s p o n d e d ,

denyin

t h a t Mr.

ross

was n t i t l e d t o

any

m o n e y ,

e s p i t e

t h e

f a c t

t h a t

t h e

t h i r d

q u a r t e r

had

s s e n t i a l l y

ended.

PIMCO's

s u a l custom

and

p r a c t i c e

was o pay

e p a r t i n g

employees an

p p r o p r i a t e

s h a r e

f o r

p a r t i a l l y

completed

q u a r t e r s .

79.

PIMCO

as

e r s i s t e d

i n

i t s

r e f u s a l

t o

pay

Mr .

ross any

o r t i o n

o f

i s

t h i r d q u a r t e r

bonus,

n

b r e a c h

o f

h e

P l a n .

PIMCO

uarantees

Mr.

ross's

E m p l o y m e n t or

Five

Years

80.

In h e

midst

o f

h e

e f f o r t s

by

Ivascyn

and

o t h e r s

t o

o u s t Mr .

ross

o r

t h e i r o v u m

p e r s o n a l g a i n ,

o t h e r s a t

PIMCO

e c o g n i z e d h i s

tremendous

v a l u e t o

both h e

c o m p a n y

and

t s

i n v e s t o r s .

81. At

PIMCO l l

managing

d i r e c t o r s

a r e

c o n s i d e r e d

t o

be p a r t

o f h e

company's

man a g e m e n t

o a r d . The

ma na g e m e n t

board o f

PIMCO s


f o r ,

a m o n g

t h e r

t a s k s ,

e l e c t i n g

PIMCO

x e c u t i v e s

t o

s e a t s o n

commi ttees such

as

h e

Executive

Committee

and h e

Investment

Committee,

s w e l l

as

o

o f f i c e s such

as

Chief

Investment

f f i c e r .

I n d i v i d u a l s

e l e c t e d

t o such

p o s t s

s e r v e

a

term o f

e a r s b e f o r e

having

o

s t a n d f o r

r e e l e c t i o n .

82.

This

term

o f

f f i c e c r e a t e s

what n

e f f e c t

i s a

u a r a n t e e o f

m p l o y m e n t

t

PIMCO

r a t i f i e d

by

h e

PIMCO

anaging

d i r e c t o r s who

omprise h e

company's

ma na g e m e n t

o a r d .

A f t e r

e l e c t i o n

t o

such

an

f f i c e ,

h o l d e r s

o f

h a t p o s i t i o n

can

expect

h a t

t h e y

would

only

be

t e r m i n a t e d f r o m

PIMCO o r

g o o d

c a u s e .

83.

N o t ven

powerful

o u n d e r s

o f

PIMCO

uch

as

Mr.

ross

were

e x e m p t

r o m

h e

e l e c t i o n

p r o c e s s . In

a c t , Mr .

ross

himself

was

overwhelmingly

e e l e c t e d

t o

h i s

p o s i t i o n

as

Chief

Investment f f i c e r

i n 2014.

Mr.

r o s s ' s

e l e c t i o n

c a r r i e d

a

term

o f

i v e

y e a r s .

1044676

15

COMPLAINT


17/37

1

2

3

4

5

6

7

8

9

10

11

12

13

~ ' '

14

t~

5

16

17

18

19

20

21

22

23

24

25

26

27

28

84.

As

consequence,

h e

PIMCO

management

board

f f e c t i v e l y

g u a r a n t e e d

Mr.

Gross's p o s i t i o n

a t

PIMCO n t i l

t h e next

e l e c t i o n

c y c l e

i n

2019.

85.

Thus, h e o u s t e r

o f

Mr.

Gross

by

Hodge, vascyn

and

o t h e r s

was

a l c u l a t e d

not only

t o s e i z e

f u r t h e r c o n t r o l

o f

PIMCO

nd

t h e b o n u s

p o o l

but

a l s o

caused

PIMCO o

b r e a c h

an

implied

em ployment o n t r a c t

with

Mr .

Gross.

86.

As a r t of

i s

compensation from

PIMCO r .

Gross

r e c e i v e d

s t o c k

o p t i o n s an d

e q u i t y g r a n t s

t h a t

were

s u b j e c t t o v e s t i n g

p e r i o d s . At

h e

time

o f

i s

o u s t e r

Mr .

Gross

h e l d

s i g n i f i c a n t

p o s i t i o n s

t h a t

had

not

y e t

v e s t e d .

Thus,

as a

u r t h e r

consequence o f

PIMCO's

b r e a c h

o f

t h e

implied

employment

o n t r a c t Mr.

Gross

has been

denied

t h e

o p p o r t u n i t y

t o

remain

a t

PIMCO

f o r

t h e f u l l v e s t i n g

p e r i o d .

FIRST

CAUSE

O

CTION

(Constructive

Termination)

87.

P l a i n t i f f

r e a l l e g e s

and

i n c o r p o r a t e s by

r e f e r e n c e each

and

every

a l l e g a t i o n

c o n t a i n e d

i n

t h e

paragraphs above

as though f u l l y

s e t

f o r t h h e r e i n .

88.

At

l l

r e l e v a n t

times h e r e i n

l a i n t i f f

and

Defendants had

an

employer

-employee

r e l a t i o n s h i p .

89.

As

l l e g e d h e r e i n

Defendants took

a d v e r s e

employment

a c t i o n s

a g a i n s t

P l a i n t i f f

u p

t o

and

i n c l u d i n g

what was,

n

e f f e c t

a e r m i n a t i o n .

90.

This t e r m i n a t i o n

was

m o t i v a t e d

by a

d e s i r e

t o

deny

P l a i n t i f f

h i s

s h a r e o f

h e

Defendants'

bonus

pool and o t h e r

compensation,

n c l u d i n g s t o c k

o p t i o n s

and e q u i t y

g r a n t s

t h a t

wer

~ s u b j c t t o a v e s t i n g

p e r i o d .

Defendants'

conduct

was o n t r a r y

t o

p u b l i c

p o l i c y

as t

was

d e s i g n e d

t o

d e p r i v e P l a i n t i f f

o f

ncome

t h a t had

been

e a r n e d

a s

w e l l

as

t o

punish

P l a i n t i f f

o r

p r o t e c t e d

conduct

i n c l u d i n g

but

not

i m i t e d

t o t h e

e x e r c i s e

of

i s

F i r s t

Am e n d m e n t

i g h t s .

91.

Moreover,

h i s


v i o l a t e d t h e d e a l

s t r u c k

between Mr .

Gross

and

D i e k m a n

i n

September

2014

where

PIMCO u r t h e r

g u a r a n t e e d

t h a t Mr .

Gross

would

have

a

o s i t i o n

a t

PIMCO t a

m i n i m um

through t h e

end o f

2014

and

would

be

e n t i t l e d t o

c o l l e c t

a l l

bonuses

an d

o t h e r

compensation f o r

t h a t y e a r .

1044676

16

COMPLAINT


18/37

1

3

4

5

6

7

8

9

10

11

. . ~ .

13

~ ` `

14

4 ~

15

16

17

18

19

20

21

22

23

24

25

26

27

28

92.

F i n a l l y ,

t h i s t e r m i n a t i o n

was n v i o l a t i o n

of

e f e n d a n t s '

commitment

o employ

P l a i n t i f f f o r

a u l l

term of i v e

y e a r s f o l l o w i n g

h i s

most e c e n t

e l e c t i o n

t o

t h e

PIMCO

x e c u t i v e

Committee

and

t h e

PIMCO

n v e s t m e n t

Committee.

D e f e n d a n t s '

conduct

n

t e r m i n a t i n g

P l a i n t i f f

w i t h o u t cause

was

c o n t r a r y

t o p u b l i c p o l i c y .

93.

As a d i r e c t

and

proximate

r e s u l t of

e f e n d a n t s ' wrongful

e r m i n a t i o n ,

P l a i n t i f f

h a s

been

damaged i n an

amount

o

be

d e t e r m i n e d a t

r i a l b u t i n

no

e v e n t l e s s t h a n

hundreds

of

i l l i o n s

of

o l l a r s .

SECOND

CAUSEOF

ACTION

(Breach of Written

Contract)

94.

P l a i n t i f f

r e a l l e g e s and

i n c o r p o r a t e s

by r e f e r e n c e each

and

e v e r y

a l l e g a t i o n

c o n t a i n e d

i n

t h e

p a r a g r a p h s above

a s

though

f u l l y

s e t f o r t h

h e r e i n .

95.

The

Amended and

R e s t a t e d P a c i f i c

Investment

Management

Company

Non

-

Q u a l i f i e d

P r o f i t

S h a r i n g P l a n ,

a s

amended

and

r e s t a t e d a s of

a n u a x y

1 ,

2012

governs

h e

PIMCO

managing

d i r e c t o r

p r o f i t

s h a r i n g

p l a n and bonus

p o o l .

96.

T h i s c o n t r a c t

was i g n e d

by

E l - E r i a n and

Hodge

on b e h a l f

of

h e

Company.

The

s i g n a t u r e

page a l s o

b e a r s

t h e

s i g n a t u r e of l a t t u m ,

PIMCO's

g e n e r a l

c o u n s e l .

97.

This

c o n t r a c t e s t a b l i s h e d

t h e

PIMCO onus pool

f o r

PIMCO's e n i o r

l e a d e r s h i p ,

i n c l u d i n g M r .

r o s s .

As u c h ,

M r . Gross

s

an

n t e n d e d

b e n e f i c i a r y

of

h i s

c o n t r a c t .

98.

Defendants

b r e a c h e d t h i s

c o n t r a c t

by, among

o t h e r

r e a s o n s , w i l l f u l l y

t e r m i n a t i n g

Mr

Gross mere

days

b e f o r e

payment

was due o him under

h e c o n t r a c t

and f o r

t h e

s o l e

p u r p o s e of

evading

t h e

c o n t r a c t u a l

o b l i g a t i o n s

f o r

t h e i r

own

e n e f i t .

99.

For

former

employees

such

a s Mr.

r o s s , s e c t i o n

3 . 1

of

h e

c o n t r a c t

p r o v i d e s

t h a t

[u] pon

h e

T e r m i n a t i o n

of

Employment

of

a

a r t i c i p a n t . . .

h i s

o r

h e r

p a r t i c i p a t i o n

i n t h e

P l a n

s h a l l

be

e r m i n a t e d ,

e x c e p t w i t h

r e s p e c t t o

t h e

P r o f i t

S h a r i n g

p a y a b l e ( i )

w i t h

r e s p e c t

t o

t h e

Covered

Q u a r t e r

p r e c e d i n g

h i s o r

h e r

T e r m i n a t i o n of

Employment...

100.

This was o t

a d i s c r e t i o n a r y

payment.

S e c t i o n

3 . 4 ( a ) of

h i s

c o n t r a c t

p r o v i d e s

t h a t

a

p a r t i c i p a n t

such

a s

M r .

Gross s h a l l

be

e n t i t l e d t o r e c e i v e

from

t h e

P r o f i t

P a r t i c i p a t i o n

P o o l ,

w i t h

1044676

17

COMPLAINT


19/37

1

2

3

4

5

6

7

8

9

10

11

. ~ .

12

. . .

C ~

13

~ ' 14

t I ~

15

16

17

18

19

20

21

22

23

24

25

26

27

28

r e s p e c t t o each

of h e

f i r s t

t h r e e q u a r t e r s

of

a

a l e n d a x

y e a r

b u t

only

t o

t h e e x t e n t a n y

such q u a r t e r

a

Covered Q u a x t e r ) ,

a

r o f i t S h a r i n g

payment...

1 0 1 .

Covered

Q u a r t e r s a

d e f i n e d term i n

t h e c o n t r a c t , and

m e a n s each

c a l e n d a r

q u a r t e r

(or

p o r t i o n

t h e r e o

s

t o

which

t h e

Plan

s

i n

e f f e c t .

1 0 2 .

As

e s u l t ,

under

h e terms of h e

c o n t r a c t , Mr.

Gross w a s

n t i t l e d t o

r e c e i v e

a

r o f i t

s h a x i n g p a y m e n t w i t h

r e s p e c t t o

t h e

p o r t i o n of

h e c a l e n d a r

q u a r t e r

p r e c e d i n g

h i s


of

e m p lo y m e n t w i t h

PIMCO, s

w e l l

a s

a

t r u e u p of

h e

p r e v i o u s

q u a r t e r s

so

t h a t

t h e

t o t a l

compensation Mr.

Gross w a s o r e c e i v e f o r

2014 w a s

20 f h e

bonus p o o l

m u l t i p l i e d

by

h e

p e r c e n t a g e

of

h e y e a r

t h a t he

worked.

1 0 3 .

By

e f u s i n g

t o

pa y

a n y p o r t i o n

of h e s e

funds o Mr.

r o s s ,

and

a s a

e s u l t

of h e i r

conduct s

s e t

f o r t h i n

t h i s

Complaint,

e f e n d a n t s b r e a c h e d

t h e

terms and

c o n d i t i o n s of

h i s

c o n t r a c t .

104.

As

d i r e c t a nd

p r o x i m a t e

r e s u l t

of

e f e n d a n t s '

b r e a c h ,

l a i n t i f f

Documents

Bill Gross complaint