Wednesday, October 26, 2011, 10/26/2011 10:33:00 AM

TCW Says Gundlach and Doubleline Owe Over $80 Million for Royalties on Trade Secrets He Misappropriated

By Todd

Reuters is reporting now regarding the damages request that TCW has made of the court in this long-fought battle over Jeffrey Gundlach's departure as an employee of TCW. As you'll recall, TCW prevailed in its claim the famed fund manager took trade secrets, although it is now up to a judge to decide damages.

Bradford Cornell, a damages witness for TCW said that without the use of proprietary information obtained from his former employer, Gundlach would not have been able to build up his new rival business Doubleline Capital so quickly and effectively."Without trade secrets, Gundlach's business wouldn't have been ready," Cornell told California Superior Court Judge Carl J. West on Tuesday. The $81.7 million figure was based on a hypothetical negotiation that would have occurred in the fall of 2009 if Gundlach had tried to buy the information contained in the trade secrets, Cornell said. Research on the internet suggests that Dr. Cornell is a professor at Cal Tech and also provides expert testimony in high-profile lawsuits through the Charles River Associates firm.

Pensions & Investments is reporting that Dr. Cornell acknowledged the basis for his assumption regarding the hypothetical negotiation was a pro forma accounting that Gundlach's associates had made regarding the amount of assets they assumed would be generated in their new business. They report: "Mr. Cornell said he made his calculations based on a pro forma financial statement that Mr. Gundlach's associates had developed for a new hypothetical asset management company. The statement, which TCW officials had discovered during searches of computers used by Mr. Gundlach's securities team in fall 2009, showed that Mr. Gundlach and associates had estimated that they would take $48 billion in assets away from TCW and would bring in $197 million in revenue in their first 10 months of operations from March 1, 2010, through Dec. 31, 2010."

Lawyers for Gundlach and Doubleline insist they do not owe anything. On cross-examination Mr. Cornell said none of the $48 billion ever went to DoubleLine and that the pro forma statement was only a calculation for a potential company that had no direct relationship to any actual money management firm that Mr. Gundlach formed.

This case continues with Gundlach's and Doubleline's experts next . . . .


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