Former Pimco Executive Files, Then Withdraws, Suit Alleging Misconduct

A former executive at the Pacific Investment Management Company, the money management giant known as Pimco, has said that he was fired last year after reporting an array of misconduct at the firm to federal law enforcement officials.
In a lawsuit filed on March 5 in California State Court, Jason Williams, 36, a former high-yield bond portfolio manager at Pimco, claimed that senior Pimco executives engaged in a variety of misdeeds, including insider trading and manipulating the ratings and values of certain bond holdings to the detriment of its clients.

 

Mr. Williams withdrew the lawsuit three days after filing it, and his lawyers and Pimco representatives are engaged in talks related to resolving the dispute, according to two people with direct knowledge of the matter.
A spokesman for Pimco did not immediately return a request for comment.
Philip M. Aidikoff, a lawyer for Mr. Williams, declined to comment. The lawsuit was first reported by Ignites, a mutual-fund industry trade publication owned by The Financial Times.
The wrongful-termination complaint had sought compensation for the damage done to Mr. Williams’s professional reputation. It also sought punitive damages.
From its headquarters in Newport Beach, Calif., Pimco manages about $2 trillion in assets, making it one of the world’s largest money management firms. The firm is perhaps best known for its founder, William H. Gross, and his heir apparent, Mohamed A. El-Erian, both of whom make frequent television appearances prognosticating on the global financial markets.
Mr. Williams, who worked at Pimco from 2000 to 2012, claimed that he had witnessed multiple instances of wrongdoing by the firm’s senior management from late 2008 to early 2009. He reported the actions to compliance officials, and also told his supervisor, Chris Dialnyas, who, according to the Pimco Web site, is a managing director and member of the firm’s investment committee.
But after Mr. Williams lodged his complaints, his pay was reduced and he was subjected to verbal abuse, according to the legal filing. Mr. Williams said that he then reported the conduct to federal agents in the Treasury Department. His complaint suggests that the agents, who worked for the special inspector general for the Treasury Asset Relief Program, opened up an investigation.
He said that in March 2012, three weeks after he informed Pimco’s human resources department that he had taken his complaints to the federal government, the firm fired him. Pimco told him that he was fired for “performance reasons,” the complaint said, but Mr. Williams maintains that he was fired because of his cooperation in an investigation into the activities inside the firm.
A spokesman for the special inspector general, Troy Gravitt, declined to comment.
The lawsuit makes a slew of accusations against Pimco executives. Mr. Williams, who held the title of vice president, said that in December 2008, a senior manager directed him to “arbitrarily elevate” the rating that a Pimco analyst had assigned to a bond in order to place the bond in funds that had a higher rating requirement.
Around that same time, Mr. Williams said, senior Pimco management “attempted unlawful trading on inside information involving stock in El Paso Corporation.”
In another claim, he said that during the financial crisis, senior management directed the transfer of certain illiquid securities that a Pimco hedge fund had “arbitrarily overvalued” to other Pimco funds. The move, according to the complaint, hurt the owners of the funds that were on the receiving end of the transfer.