Bill Gross, Pimco settle lawsuit over his exit for $81 million: sources
Bill Gross has reached a roughly $81 million settlement of his lawsuit against Pacific
Investment Management Co, ending a bitter 2-1/2-year drama over the well-known bond
investor's abrupt departure from one of the world's biggest asset managers.
Terms of the accord were not disclosed, but were confirmed by two people familiar with
the matter, who asked not to be named because the terms were confidential.
Gross and Pimco said in a joint statement the settlement was "amicable," and that Pimco
will donate the proceeds to charity.
"Pimco has always been family to me, and, like any family, sometimes there are disagreements,"
Gross, a Pimco co-founder, said in the statement.
The accord quietly ends an acrimonious battle over the 72-year-old billionaire's September
2014 exit from Pimco, where he had been chief investment officer.
That battle played out first in the media, and then in Gross' $200 million lawsuit.
Gross, who now works for Denver-based Janus Capital Group Inc (JNS.N), left Pimco following
negative reports about his leadership and weak returns at Pimco Total Return (PTTRX.O),
once the world's largest bond mutual fund with $293 billion of assets at its peak.
In his October 2015 lawsuit, Gross accused a greedy "cabal" of Pimco executives, including
group chief investment officer Dan Ivascyn, of plotting to oust him so they could divide
his 20 percent share in Pimco's bonus pool among themselves.
The pool totaled $1.3 billion in 2013, and Gross' pay that year topped $300 million,
according to the complaint filed in California Superior Court.
Pimco, a Newport Beach, California-based unit of German insurer Allianz SE (ALVG.DE), countered
that Gross' "egregious misconduct," including abusive behavior toward colleagues, would
have justified his firing had he not resigned.
Once known on Wall Street as the "Bond King," Gross left Pimco eight months after his second-in-command
Mohamed El-Erian quit, in part because of Gross' management style.
Gross is worth $2.5 billion, according to Forbes magazine.
The joint statement reflected Pimco's recognition of Gross' role in building the firm into a
mutual fund powerhouse over four decades, with more than $2 trillion of assets under
management, even if his last months proved uncomfortable.
"Bill Gross has always been larger-than-life," Ivascyn said.
"Bill has had an enormous influence on Pimco and the careers of many who have passed through
its halls.
He built this business from the ground up and we have great respect and admiration for
his talents."
In the statement, Gross also said: "I've always been amazed by my success, and grateful for
the opportunity to make a difference in the world.
I'm glad that can continue."
Gross has been unable to replicate his Pimco success at Janus.
His Global Unconstrained Bond fund (JUCAX.O) has just $1.9 billion of assets, and been
outperformed by 80 percent of its peers in the last year, according to Morningstar.
Janus said last October it planned to merge with London-based Henderson Group Plc (HGGH.L).
Pimco said it will dedicate a "Founders Room" at its headquarters to honor its co-founders,
while its Pimco Foundation named Gross a director emeritus and established an annual award in
his name.
The case is Gross v. Pacific Investment Management Co et al, California Superior Court, Orange
County, No. 2015-00813636.
Trump tax plan faces rockier road after stinging healthcare loss
Following the failure of a healthcare bill backed by President Donald Trump, his administration
plans to take a lead role in crafting major legislation to cut taxes with an eye toward
meeting an August target date, the White House said on Monday.
Trump's pledge to cut taxes, including a lowering of the rates paid by corporations, was a pillar
of his 2016 presidential campaign and provided much of the fuel for the heady stock market
rally that followed his Nov. 8 victory.
"Obviously, we're driving the train on this," White House spokesman Sean Spicer told a briefing.
"We're going to work with Congress on this," Spicer said, adding that tax cut legislation
is a "huge priority" for the Republican president and "something that he feels very passionately
about."
Spicer noted that U.S. Treasury Secretary Steven Mnuchin has talked about August as
a target date for tax legislation, but added that the timetable could slip depending on
how quickly a consensus could be reached.
Getting a broad tax bill passed by Congress and on Trump's desk for signature into law
looks to be no easy feat, especially after intra-party differences last week torpedoed
the healthcare legislation he had backed.
Republicans for seven years had promised to dismantle Democratic former President Barack
Obama's Affordable Care Act, dubbed Obamacare, and the Trump administration had made it its
top priority when he took office in January.
But the effort collapsed on Friday when members of the Freedom Caucus, including the most
conservative lawmakers of the House of Representatives, refused to support the bill, which was also
backed by House Speaker Paul Ryan.
The stinging defeat alarmed investors who began reassessing the chances for passage
of the tax agenda this year.
Major U.S. stock indexes opened sharply lower on Monday before paring the lion's share of
the losses.
The healthcare failure in Trump's first major legislative initiative showed that keeping
Republicans united is a tricky business.
'TRUMP IS STUCK'
"Trump is stuck, he can't cajole the arch conservatives in the Republican Party and
at the same time, my sense is the Democrats don't want to throw him a bone either, so
it is going to be difficult," said Jack Ablin, chief investment officer at BMO Private Bank
in Chicago.
"It's going to be very, very difficult," Republican lawmaker Ted Poe of Texas told CNN's "New
Day" program.
Poe, who resigned from the Freedom Caucus after the healthcare debacle, said Trump's
hope of getting a major infrastructure spending through Congress was no "slam dunk" because
of likely opposition from conservatives.
Infrastructure spending is another leg of the "pro-growth" Trump strategy.
"It is so easy to sit back, cross your arms, say 'No, not going to support that.'
And then what do we have?"
Poe said.
"... We have to lead.
We're the party in power."
Analysts at Bank of America Merrill Lynch said in a research note that a tax bill, "if
passed at all, could be a very watered-down version of current proposals."
The White House over the weekend dangled the idea of a compromise tax restructuring that
could win support from moderate Democrats.
White House chief of staff Reince Priebus on Sunday said such a package could include
middle-class tax cuts.
Spicer on Monday remained vague on how much Trump would allow the federal deficit to grow
as a result of the tax cuts.
"It's a really early question to be asking at this point," Spicer said.
The U.S. tax code has not undergone a major overhaul since 1986, during Republican former
President Ronald Reagan's administration.
Democratic Senator Christopher Coons signaled his party would be open to discussing tax
legislation if it was not merely a giveaway to the rich.
Democrats fought former President George W. Bush's tax policies for that reason.
"If we have a move toward tax reform that could strengthen manufacturing, strengthen
our exports and provide tax relief to the middle-class - not overwhelmingly to the wealthiest
- there's a menu for us to start talking about it," the Delaware senator told MSNBC's "Morning
Joe" program.
Although winning over Democrats may be tough, the alternative - getting Republicans to vote
as a bloc - it could be a hard road in light of the healthcare rebellion by Republican
lawmakers.
Despite aggressive lobbying by Trump, Ryan and Vice President Mike Pence, Freedom Caucus
members saw too may similarities to Obamacare.
Moderates were concerned over the prospect of millions of Americans losing health insurance.
One Republican lawmaker, Representative Tom Cole of Oklahoma, suggested Congress focus
first on such things as getting a "realistic budget" done and passing legislation to raise
the national debt ceiling.
"And then start on tax reform," Cole told MSNBC's "Morning Joe" program, adding, "But
start with real hearings and start in a way that everybody at least at the outset is a
potential player."United Airlines bars teenage girls in leggings from flight
Two teenage girls wearing leggings were barred from boarding a United Airlines flight on
Sunday because they did not meet a dress code for special pass travelers, a company spokesman
said amid a furor on social media.
The two girls, who were traveling with a companion, would not have been turned away for wearing
leggings had they been paying customers, United spokesman Jonathan Guerin said as the airline
responded to the backlash.
"(The two girls) were instructed that they couldn't board until they corrected their
outfit.
They were fine with it and completely understood," Guerin said, adding that all three passengers
missed the flight.
He did not know if they had boarded a later plane or made alternate travel arrangements.
Though the three passengers did not complain about their treatment, another traveler, Shannon
Watts, who overheard the discussion touched off a firestorm on social media with a series
of tweets describing a policy she suggested was unfairly targeting women and girls.
"This behavior is sexist and sexualizes young girls," Watts said on Twitter.
"Not to mention that the families were mortified and inconvenienced."
United pass travelers are typically company employees or their friends or family members.
Watts' tweets and United's defense of it touched a raw nerve for many women and girls who have
made leggings a staple in their wardrobes.
The popularity of leggings has sparked criticism that they are inappropriate attire under certain
circumstances.
Some schools have barred girls from wearing them to class.
Social media lit up with outrage against the policy and the airline for its response to
the initial outcry.
Celebrities chimed in with humorous protests.
"I have flown united before with literally no pants on.
Just a top as a dress.
Next time I will wear only jeans and a top," model Chrissy Teigen tweeted.
United later put out a statement titled: "To our customers ... Your leggings are welcome!"
that explained the policy for passholders in greater detail.
That policy also bars midriff-baring tops, attire that reveals undergarments or is designated
as sleepwear or swimwear, mini-skirts, shorts that fall less than 3 inches above the knee
or dirty or torn clothing.
Guerin conceded that the airline, in its initial response to the flap, could have done a better
job of explaining the situation and countering apparently inaccurate information about the
incident that appeared on Twitter.
"We'll definitely take something away from today, but we'll continue to engage with our
customers (on social media)," he said.
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