(Bloomberg) -- Pimco will fight a lawsuit by a shareholder of its Total Return Fund alleging the company gouges investors with excessive advisory fees to support billion-dollar bonuses for top executives.

Pimco was sued Dec. 31 in Seattle federal court over claims that fees totaling $1.2 billion in 2013 are unfair and excessive, bear no reasonable relationship to the services rendered and couldn’t have been the product of arms length negotiations, according to the complaint.

Pimco breached its fiduciary duties to investors and should return fees and improper compensation to shareholders, investor Robert Kenny said in the complaint.

“Pimco believes this lawsuit is without merit and intends to vigorously defend itself,” Agnes Crane, a Pimco spokeswoman, said today in an email.

Pimco paid more than $1.5 billion in bonuses to top executives while the fund’s performance suffered, said Kenny of Clinton, Washington, who is being represented by attorneys at Keller Rohrback, a firm that has represented institutional investors in lawsuits over Libor manipulation and securities lending.

Bill Gross, who managed the Total Return Fund, the world’s biggest bond fund, left in September to join Janus Capital Group. He received $290 million in bonus pay in 2013, Kenny said in the complaint.


Separately, Gross said Jan. 12 that he was fired, the first time he’s publicly confirmed that he was dismissed from the Newport Beach, Calif.-based firm he co-founded in 1971.

In 2013, the fund lost 1.92% and trailed 70% of its peers in its worst performance since 1994, according to the complaint.

The fund stumbled when the Federal Reserve hinted it would unwind stimulus measures, sparking client redemptions. By October, it had ceded the title of biggest mutual fund to an offering from Vanguard Group. The Pimco fund has been reduced in size to $143.4 billion as of Dec. 31.

The case is Kenny v. Pacific Investment Management Co., 14-01987, U.S. District Court, Western District of Washington (Seattle).

Read more:

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access