'Bond king' Gross sues Pimco over his ouster

Global bond guru Bill Gross sued Pimco on Thursday, accusing a "cabal" at the bond firm he co-founded of forcing him out to grab a bigger slice of its profits.

Gross, in a California lawsuit that also targets Pimco's German parent Allianz, is seeking a jury trial over his complaint that he was dismissed unfairly in 2014 and cheated of hundreds of millions of dollars in compensation.

"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, a cabal of Pacific Investment Management Company LLC managing directors plotted to drive founder Bill Gross out of Pimco," said the complaint.

"Their improper, dishonest, and unethical behavior must now be exposed."

The colorfully-written suit alleges wrongful termination and breach of contract and seeks damages plus interest and attorneys fees.

Pimco said it will fight the claims.

"This lawsuit has no merit and our legal team will be responding in court in due course," a Pimco spokesman said. "Our focus remains on our clients and their investment portfolios."

The suit recasts the events that led to the September 2014 departure of "bond king" Gross for rival Janus Capital Group.

At the time, Pimco chief executive Douglas Hodge thanked Gross for his service, but said "over the course of this year it became increasingly clear that the firm's leadership and Bill have fundamental differences about how to take Pimco forward."

Gross' departure followed the shock resignation of Gross' would-be successor, Mohamed El-Erian in January 2014.

Relations between the two one-time allies began to fray after Pimco's poor performance in 2013 caused investors to pull out billions of dollars. Pimco currently manages $1.52 trillion in assets.

A key disagreement, according to the suit, was El-Erian's preference to shift Pimco into a range of non-bond investments, such as stocks, commodities, real estate and hedge-fund products, which would take the company away from the low-risk "bonds and burgers" approach favored by Gross.

When Gross offered to cede control of many investments to El-Erian, the latter resigned suddenly because he "was angry and apprehensive at the idea that he would have to bear sole responsibility (and blame) for the high-risk, high-fee investments he had expanded Pimco into," according to Gross' claim.

Gross accused another Pimco executive, Andrew Balls, of orchestrating a series of negative media leaks that cast El-Erian's resignation as Gross' fault.

When Balls' role in the negative media campaign was uncovered in an internal probe, Hodge and other senior Pimco officials refused to dismiss the executive, part of what Gross' suit alleged was a larger plot to oust him "for their own personal benefit and egos."

Gross was paid bonuses of $16 million compared to more than $250 million expected in 2014, despite working nearly three quarters of the year. His claim seeks compensation for the bonus, as well as for being forced to leave Pimco before receiving stock options and equity grants that had not yet vested.