Published March 13, 2013
A former junk bond portfolio manager at PIMCO, the $2 trillion money management firm, claimed he was fired last year in retaliation for reporting financial misconduct at the firm to U.S. regulators, court papers show.
In a complaint filed on March 5 in an Orange County, California state court, Jason Williams, 36, said PIMCO fired him last March after he reported that senior managers were involved in a variety of improper activities, including at the height of the recent global financial crisis.
He alleged that these activities included insider trading; the manipulation of the price of an exchange-traded version of PIMCO Total Return, the world's largest bond fund; and the alleged overvaluing and public recommendation of securities that PIMCO was "aggressively" selling at the time.
The lawsuit had sought compensatory and punitive damages, but Williams dismissed the lawsuit without prejudice three days after it was filed. Lawyers for Williams and PIMCO are in talks to resolve the dispute, according to a person with direct knowledge of the matter, who was not authorized to speak publicly.
David Spivak and Philip Aidikoff, who are lawyers representing Williams, declined to comment.
"As a matter of policy, we do not comment on legal matters," a PIMCO spokesman said. "However, PIMCO performs an appropriate review of all employee complaints or concerns."
Pacific Investment Management Co is run by Bill Gross and Mohamed El-Erian. They were not named in Williams' lawsuit.
Williams, who said he has worked at PIMCO for 11-1/2 years, said he reported the alleged improper conduct to compliance officials and his supervisor Chris Dialynas, a managing director and member of PIMCO's investment committee.
Dialynas, who could not be reached for comment, is manager of the PIMCO Unconstrained fund, which invests in a variety of sectors and regions.
Williams contended that in response to his complaints, PIMCO managers lowered his pay and subjected him to "verbal abuse."
He said he also reported the conduct in December 2011 to the U.S. Department of the Treasury's Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and the following February 17 told PIMCO he had done so.
But Williams said he was ultimately fired on March 6 because of these disclosures and his cooperation in a resulting investigation. He said PIMCO cited "performance reasons" for the firing, though his work remained satisfactory.
Among the allegations were that in late 2008, there was misconduct at PIMCO involving "attempted unlawful trading on inside information involving stock in El Paso Corporation."
Williams also said that in December 2008, a senior manager directed him to "arbitrarily elevate" the rating a PIMCO analyst had assigned to a bond, so that the bond would qualify for inclusion in funds that required higher credit quality.
SIGTARP and the U.S. Securities and Exchange Commission, which often investigates insider trading, did not immediately respond to requests for comment.
The case is Williams v. Pacific Investment Management Co et al, Superior Court of California, Orange County, No. 30-2013-00635253.
(Reporting By Jennifer Ablan and Jonathan Stempel; Editing by Bernard Orr)