Janus Capital Group’s chief executive acknowledged that a side deal he struck with one of the firm’s star portfolio managers broke a promise to give all fund overseers equal contract protections.
Gary Black testified in Denver District Court on Tuesday that the Denver-based investment firm’s officials decided in 2005 to give a secret deal to Scott Schoelzel, head of Janus’ Twenty Fund at the time. They earlier had promised Janus’ 20 other fund managers that all of their compensation agreements would have the same protections.
“We made a business decision to give Scott a special plan,” Black said during the trial of a lawsuit filed by Edward Keely, an ex-Janus fund manager. Black said Janus officials felt they had to reward Schoelzel, recognized as one of the U.S.’s top stock pickers, because he was a “franchise player.”
Black, 49, was Janus’ chief investment officer before becoming CEO in January 2006.
The trial is throwing a spotlight on Black’s move in 2004 to curtail the power of individual fund managers in favor of team-based investing and altering of compensation agreements.
Black, a former investment chief at Goldman Sachs Asset Management’s global-equities business, in 2004 arrived at company that had been battered by the collapse of technology stocks and the mutual-fund trading scandal of 2003.
Black acknowledged that, in a December 2004 e-mail about a push to change fund managers’ compensation agreements to make them more standardized, he vowed to provide equal protections for all managers.
“If we agree to an add-on protection for one PM, everyone gets that protection,” Black told Keely and other fund managers in an e-mail that was introduced into evidence in the case.
