The U.S. Justice Department has inserted itself into the nasty battle between TCW Group and its former chief investment officer, Jeffrey Gundlach.
Gundlach's new hedge fund, DoubleLine Capital, said the U.S. Attorney's office in New York and the special inspector general for the Troubled Asset Relief Program have questioned the Los Angeles-based firm's employees about TCW's allegations that DoubleLine, which features more than a few ex-TCW employees, stole its proprietary information.
The TARP inspector is involved because Gundlach was supposed to manage a fund at TCW participating in the bailout program.
"The federal criminal grand jury investigation relates to the theft of trade secrets from TCW by DoubleLine and certain of its principals," a lawyer for TCW, Steen Madison, said. TCW filed another lawsuit against DoubleLine and Gundlach last week, alleging that the hedge fund is using TCW's proprietary information and systems.
Gundlach denies any wrongdoing.
"Our superior investment results relative to those generated by TCW this year are a priori proof of the false nature of TCW's claim. I challenge TCW to publicly identify a single alleged 'trade secret' that DoubleLine is using," he said in a statement. "Based on what TCW has produced at court, such an attempt should provide significant comedy and be the object of derision at every trading desk in America."
DoubleLine said it is cooperating with the federal investigation.
Gundlach's departure from TCW was ugly: The firm fired Gundlach slightly over a year ago for allegedly building DoubleLine while still on its payroll. It also said a search of his office after his firing uncovered marijuana and drug paraphernalia, as well as a veritable library of "hardcore" pornographic materials