Spitfire List Web site and blog of anti-fascist researcher and radio personality Dave Emory.

For The Record  

FTR #613 The Socialism of Fools, Part 2: American Dreyfus

Record­ed Octo­ber 7, 2007
MP3: Side 1 | Side 2

Intro­duc­tion: Sup­ple­ment­ing FTR#567, this pro­gram high­lights the resur­gence of anti-Semi­tism in the Unit­ed States and else­where. [The title of the pro­gram refers to a char­ac­ter­i­za­tion of anti-Semi­tism by a 20th cen­tu­ry social crit­ic as “the social­ism of fools.”] Of par­tic­u­lar sig­nif­i­cance in the pro­gram is the scape­goat­ing of “Jews” or “the Israel lob­by” for the sins of oth­ers, the petro­le­um indus­try and its relat­ed con­stituen­cies in par­tic­u­lar.

Begin­ning with dis­cus­sion of the eco­nom­ic util­i­ty of geno­cide, the pro­gram notes that such slaugh­ter is usu­al­ly cov­ered-up when the blood­let­ting serves the inter­ests of pow­er­ful eco­nom­ic forces. After set­ting forth a num­ber of stri­dent­ly anti-Semit­ic state­ments by promi­nent per­son­ages around the world, the broad­cast tack­les two sig­nif­i­cant fea­tures of the re-emer­gence of “the social­ism of fools.”

The first is the use of the term “neo-con­ser­v­a­tives” to mean “Jews”—the sup­posed archi­tects of the Iraqi inva­sion. Anoth­er key point con­cerns the cir­cum­stances sur­round­ing Har­vard University’s pre­sen­ta­tion of a paper blam­ing the Iraq war and oth­er events on the “Israel Lob­by.” The broad­cast under­scores that Harvard’s pre­sen­ta­tion of the paper fol­lowed the appoint­ment of a Mus­lim to head Harvard’s endow­ment fund and Sau­di Prince Alwaleed’s dona­tion of $20 mil­lion to the Uni­ver­si­ty to fund Mid­dle East­ern stud­ies.

Mohamed El-Erian, the head of Harvard’s endow­ment fund, had pre­vi­ous­ly worked for Ger­man finan­cial firm Allianz and recent­ly returned to work for that com­pa­ny after leav­ing Har­vard. In addi­tion to a steady infu­sion of funds from Sau­di Ara­bia into Amer­i­can media and aca­d­e­m­ic insti­tu­tions, the growth in anti-Semi­tism is being fuelled by slant­ed jour­nal­is­tic cov­er­age of the Mid­dle East.

Of par­tic­u­lar sig­nif­i­cance in this regard is the fak­ing or exag­ger­a­tion of sup­posed Israeli atroc­i­ties. (For more about this, see—among oth­er programs—FTR#564.) Per­haps the most sig­nif­i­cant of these is the death of Mohammed al-Dura, a boy sup­pos­ed­ly killed by Israeli troops in the ear­ly days of the Sec­ond Intifa­da. Recent lit­i­ga­tion in France spot­lights the seri­ous dis­crep­an­cies in the offi­cial ver­sion of the case—discrepancies that sug­gest that the inci­dent may have been mis­rep­re­sent­ed or even faked alto­geth­er. Con­clud­ing with more dis­cus­sion of the anti-Semit­ic bent tak­ing hold on Amer­i­can cam­pus­es, the pro­gram high­lights the Uni­ver­si­ty of California’s delib­er­ate exclu­sion of Israelis from a pro­gram that trains res­i­dents of Mid­dle East­ern coun­tries for careers in busi­ness.

Pro­gram High­lights Include: Har­vard endow­ment fund head Mohamed El-Erian’s employ­ment with Pim­co, a sub­sidiary of Ger­man insur­ance giant Allianz both before and after his employ­ment with Har­vard; Pimco’s move to take advan­tage of the sub­prime mort­gage cri­sis; review of the con­trol of major Ger­man cor­po­ra­tions by the Bor­mann cap­i­tal net­work and the Under­ground Reich; review of James Baker’s Rice Uni­ver­si­ty think tank in gen­er­at­ing the impe­tus to invade Iraq.

1. The pro­gram begins with author Christo­pher Simpson’s rumi­na­tions on the social sig­nif­i­cance of geno­cide and the denial of it by the pow­er elites who per­pe­trate it. This is, of course, to be seen in the con­text of the exon­er­a­tion of the per­pe­tra­tors of the Nazi geno­cide against the Jews and the re-emer­gence of vir­u­lent anti-Semi­tism in the West. (FTR#614 dis­cuss­es the exon­er­a­tion of the Nazi killers in the con­text of the return to pow­er of the busi­ness elite who aid­ed in, and prof­it­ed from, the geno­cide against the Jews.) “Who then, or what, is the splen­did blond beast? It is the destruc­tion inher­ent in any sys­tem or order, the insti­tu­tion­al­ized bru­tal­i­ty whose exis­tence is denied by cheer­lead­ers of the sta­tus quo at the very moment they feed its appetite for blood. The present world order sup­plies sta­bil­i­ty and ratio­nal­i­ty of a sort for human soci­ety while its day-to-day oper­a­tions chew up the weak, the scape­goats, and almost any­one else in its way. This is not nec­es­sar­i­ly an evil con­spir­a­cy of insid­ers; it is a struc­tur­al dilem­ma that gen­er­ates itself more or less con­sis­tent­ly from place to place and from gen­er­a­tion to gen­er­a­tion. Much of mod­ern soci­ety has been built upon geno­cide. This crime was inte­gral to the emer­gence of the Unit­ed States, of czarist Rus­sia and lat­er the USSR, of Euro­pean empires, and of many oth­er states. Today, mod­ern gov­ern­ments con­tin­ue exter­mi­na­tion of indige­nous peo­ples through­out Asia Africa, and Latin Amer­i­ca. Equal­ly per­ni­cious, though often less obvi­ous, the present world order has insti­tu­tion­al­ized per­se­cu­tion and depri­va­tion of hun­dreds of mil­lions of chil­dren, par­tic­u­lar­ly in the Third World, and in this way kills count­less inno­cents each year. These sys­temic atroc­i­ties are for the most part not even regard­ed as crimes, but instead are writ­ten off by most of the world’s media and intel­lec­tu­al lead­er­ship as acts of God or of nature whose ori­gin remains a mys­tery. It is indi­vid­ual human beings who make the day-to-day deci­sions that cre­ate geno­cide, reward mass mur­der, and ease the escape of the guilty. But social sys­tems usu­al­ly pro­tect these indi­vid­u­als from respon­si­bil­i­ty for ‘autho­rized’ acts, in part by pro­vid­ing ratio­nal­iza­tions that present sys­temic bru­tal­i­ty as a nec­es­sary evil. Some observers may claim that men such as Allen Dulles, Robert Mur­phy, et al. were gripped by an ide­al of a high­er good when they pre­served the Ger­man busi­ness elite as a hedge against rev­o­lu­tion in Europe. But in the long run, their inten­tions have lit­tle to do with the real issue, which is the char­ac­ter to take on the appear­ance of wis­dom, rea­son, or even jus­tice among the men and women who lead soci­ety. Progress in the con­trol of geno­cide depends in part on con­fronting those who would legit­imize and legal­ize the act. The cycle of geno­cide can be bro­ken through rel­a­tive­ly simple—but polit­i­cal­ly difficult—reforms in the inter­na­tion­al legal sys­tem. It is essen­tial to iden­ti­fy and con­demn the deeds that con­tribute to geno­cide, par­tic­u­lar­ly when such deeds have assumed a man­tle of respectabil­i­ty, and to ensure just and even­hand­ed pun­ish­ment for those respon­si­ble. But the temp­ta­tion will be to accept the induce­ments and ratio­nal­iza­tions soci­ety offers in exchange for keep­ing one’s mouth shut. The choice is in our hands.”
(The Splen­did Blond Beast: Mon­ey, Law and Geno­cide in the 20th Cen­tu­ry; Christo­pher Simp­son; Com­mon Courage Press [SC]; Copy­right 1995 by Christo­pher Simp­son; ISBN 1–56751-062–0; pp. 286–7.)

2. Turn­ing to the sub­ject of “the social­ism of fools”—anti-Semitism—the pro­gram sets forth an elo­quent col­umn that sum­ma­rizes the prob­lem. Of par­tic­u­lar sig­nif­i­cance is author Hanson’s fin­ger­ing of the term “neo-con­ser­v­a­tives” as a term used by the so-called pro­gres­sive sec­tor to mean “Jews.” “Who recent­ly said: ‘These Jews start­ed 19 Cru­sades. The 19th was World War I. Why? Only to build Israel.’ Some holdover Nazi? Hard­ly. It was for­mer Prime Min­is­ter Necmet­tin Erbakan of Turkey, a NATO ally. He went on to claim that the Jews — whom he refers to as ‘bac­te­ria’ — con­trolled Chi­na, India and Japan, and ran the Unit­ed States. . . . A new vir­u­lent strain of the old anti-Semi­tism is spread­ing world­wide. This hate—of a mag­ni­tude not seen in over 70 years—is not just espoused by Iran’s loony pres­i­dent, Mah­moud Ahmadine­jad, or rad­i­cal jihadists. . . Here at home, ‘neo-con­ser­v­a­tive’ has become syn­ony­mous with a sup­posed Jew­ish cabal of Wash­ing­ton insid­ers who hijacked U.S. pol­i­cy to take us to war for Israel’s inter­est. That our State Depart­ment is at the mer­cy of a Jew­ish lob­by is the theme of a recent high-pro­file book by pro­fes­sors at Har­vard Uni­ver­si­ty and the Uni­ver­si­ty of Chica­go. . . .”
(“Look­ing for a Scape­goat: by Vic­tor Davis Han­son; San Fran­cis­co Chron­i­cle; 9/13/07; p. B7.)

3. Before turn­ing to the political/economic cir­cum­stances sur­round­ing the pub­li­ca­tion of the Israel Lob­by paper at Har­vard, it should be not­ed that the “Israel Lob­by” is being scape­goat­ed for the Bush administration’s dis­as­trous deci­sion to invade Iraq, despite the rather obvi­ous fact that the inva­sion was moti­vat­ed by—surprise, surprise—oil. In this con­text, note that the Pres­i­dent and Vice-Pres­i­dent of the Unit­ed States are for­mer petro­le­um indus­try CEO’s from the state of Texas. Note also that the impe­tus to invade Iraq was first dis­closed in a paper gen­er­at­ed for the admin­is­tra­tion by a Rice Uni­ver­si­ty think tank head­ed up by fel­low Tex­an (and Bush I admin­is­tra­tion vet­er­an) James Bak­er. (For more about this report and its con­nec­tions to the “Cal­i­for­nia ener­gy cri­sis” of 2000–2001, see FTR#420.) Inter­est­ing­ly and sig­nif­i­cant­ly, that same James Bak­er co-chaired (with for­mer rep­re­sen­ta­tive Lee Hamil­ton) a com­mis­sion on how to dis­en­gage from Iraq. The rec­om­men­da­tion was that, for the Iraqi mess to be resolved, Israel must make some con­ces­sions in its per­pet­u­al war against the Pales­tini­ans and oth­er Arabs, a stance that tends to rein­force the illu­sion that “the Jews” were respon­si­ble for the inva­sion.

4. The above col­umn alludes to the recent pub­li­ca­tion of a book by two pro­fes­sors alleg­ing that a Jew­ish cabal con­trols the State Depart­ment and U.S. for­eign pol­i­cy. That book derives from a paper pre­sent­ed by Har­vard University’s John F. Kennedy School of Gov­ern­ment. The pub­li­ca­tion of that paper fol­lowed short­ly after Prince Alwaleed of Sau­di Ara­bia donat­ed $20 mil­lion to Har­vard to pro­mote Mid­dle East­ern stud­ies and Christian/Muslim under­stand­ing. “No Jews Allowed!” [Note that the paper was orig­i­nal­ly com­mis­sioned by the Atlantic mag­a­zine, which declined to pub­lish it because of its lack of schol­ar­ly integri­ty!] “ . . . The Saud­is and their allies have not been shy about sup­ple­ment­ing their con­sid­er­able lever­age in the U.S. by tar­get­ing expen­di­tures to affect the debate over Mid­dle East pol­i­cy by fund­ing think tanks, Mid­dle East stud­ies pro­grams, advo­ca­cy groups, com­mu­ni­ty cen­ters and oth­er insti­tu­tions. To take one obvi­ous exam­ple, just last year Sau­di Prince Alwaleed bin Talal donat­ed $20 mil­lion each to Har­vard and George­town Uni­ver­si­ties for pro­grams in Islam­ic stud­ies. Prince Alwaleed, chair­man of a Riyadh-based con­glom­er­ate, is the fel­low whose $10 mil­lion dona­tion to the Twin Tow­ers Fund fol­low­ing the Sept. 11 attacks was reject­ed by then-May­or Rudolph Giu­liani after the Sau­di Prince sug­gest­ed that the U.S. ‘re-exam­ine its poli­cies in the Mid­dle East and adopt a more bal­ance stance toward the Pales­tini­ans.’ George­town and Har­vard had no appar­ent qualms about accept­ing Prince Alwaleed’s mon­ey. The direc­tor of Georgetown’s new­ly-renamed Prince Alwaleed bin Talal Cen­ter reject­ed any sug­ges­tion that the Sau­di mag­nate was attempt­ing to use Sau­di oil wealth to influ­ence Amer­i­can pol­i­cy in the Mid­dle East. . . . Although the aggres­sive deploy­ment of petrodol­lars and oil-based influ­ence from for­eign sources aimed at advanc­ing a pro-Arab line con­sti­tutes ‘noth­ing wrong’ as far as Israel’s crit­ics are con­cerned, a new polit­i­cal fash­ion holds that there is some­thing very wrong indeed about Amer­i­can Jews and oth­er Amer­i­can back­ers of Israel express­ing their sup­port for Israel and urg­ing their polit­i­cal lead­ers to join them in that sup­port. Our major news­pa­pers and net­works, with cor­re­spon­dents in Israel polit­i­cal sys­tem that is a free-for-all and an aston­ish­ing­ly vibrant and self-crit­i­cal Israeli press, report dai­ly on every twist and turn of the con­flict and are very fre­quent­ly crit­i­cal of Israel. As for Amer­i­can cam­pus­es, most objec­tive observers would have lit­tle dif­fi­cul­ty con­clud­ing that far from being crit­i­cism-free, they are in fact dom­i­nat­ed by crit­ics of Israel. Clear­ly, as stran­gle­holds on crit­i­cism go, what­ev­er stran­gle­hold the pro-Israel com­mu­ni­ty has on debate in the U.S. is a very loose one indeed. . . .”
(“Anti-Semi­tism and the Anti-Israel Lob­by” by Jeff Rob­bins; The Wall Street Jour­nal; 9/7/2007; p. A15.)

5. Although Har­vard has gone to great lengths to under­score that the paper is not an offi­cial stance tak­en by the Uni­ver­si­ty, it is dif­fi­cult not to assume that the paper is a “Har­vard” paper. Indeed, note the Inter­net page on which the paper’s title appears—how would one not con­clude that the paper was pub­lished by Har­vard? The paper can be viewed here:
(“The Israel Lob­by and U.S. For­eign Pol­i­cy” by John J. Mearsheimer and Stephen Walt; 3/13/2006.)

6. Again, although the Uni­ver­si­ty removed its logo from the paper, it is Mr. Emory’s view that Harvard’s dis­claimer is some­what disin­gen­u­ous. Check out the page above—what would you con­clude when view­ing this? “The Kennedy School of Gov­ern­ment (KSG) removed its logo from a con­tro­ver­sial paper pub­lished last week by Aca­d­e­m­ic Dean Stephen M. Walt and the Uni­ver­si­ty of Chicago’s John J. Mearsheimer. A dis­claimer stat­ing that the views expressed belong only to the authors was also made more promi­nent on the work­ing paper’s cov­er. . . .”
(“KSG Seeks Dis­tance from Paper” by Paras D. Bhayani; Har­vard Crim­son; 3/24/2006.)

7. Sup­ple­ment­ing dis­cus­sion of the Walt/Mearsheimer paper, Mr. Emory notes that Harvard’s “pre­sen­ta­tion” of the work fol­lows short­ly on the appoint­ment of a Muslim—Mohamed El-Erian–as head of the Har­vard endow­ment fund. Mr. Emory’s point is that mon­ey often deter­mines pop­u­lar ide­ol­o­gy and the forms that it takes. With the enor­mous amounts of cap­i­tal flow­ing into the cof­fers of the petro­le­um indus­try and the nations and indi­vid­u­als asso­ci­at­ed with it, we should not, per­haps, be sur­prised at the upsurge in anti-Semi­tism. Of par­tic­u­lar sig­nif­i­cance is the fact that Pim­co is a sub­sidiary of key Ger­man insur­er Allianz, one of the Ger­man core cor­po­ra­tions and—as such—a key com­po­nent of the Bor­mann cap­i­tal net­work and the Under­ground Reich. Note, also, that Allianz has been a tar­get of lit­i­ga­tion by the fam­i­lies of Holo­caust sur­vivors, who charge that the com­pa­ny held onto assets due to them. (For more about cor­po­rate Ger­many and its links to the Under­ground Reich, see—among oth­er programs—FTR#305. Seri­ous researchers should down­load and read the book Mar­tin Bor­mann: Nazi in Exile, avail­able on the Spit­fire web­site. For more about Allianz, search the Spit­fire web­site. For more about Allianz and the Holo­caust lit­i­ga­tion, do a key word search on your favorite search engine.) “Har­vard University’s endow­ment, known for its strong invest­ment gains, is now suf­fer­ing a sig­nif­i­cant loss. Mohamed El-Erian, head of Har­vard Man­age­ment Co., is head­ing back to the West Coast, posi­tion­ing him­self to be heir appar­ent at Pacif­ic Invest­ment Man­age­ment Co., the mon­ey-man­age­ment titan. . . . Mr. El-Erian, 49 years old, will start in Jan­u­ary at Pim­co, a unit of Ger­man Insur­er Allianz SE, as the New­port Beach, Calif., firm’s first co-chief invest­ment offi­cer and co-chief exec­u­tive offi­cer. . . .[Empha­sis added.] ”
(“Harvard’s Loss: El-Erian” by Craig Karmin and Ian McDon­ald; The Wall Street Jour­nal; 9/12/2007; p. C1.)

8. El-Erian’s return to Pim­co occurred as Pim­co is prepar­ing to take advan­tage of the sub­prime cri­sis. “Anoth­er vul­ture is cir­cling over the sub­prime-relat­ed mar­ket. Pacif­ic Invest­ment Man­age­ment Co., a unit of Germany’s Allianz SE, is plan­ning to launch a $2 bil­lion dis­tressed-debt fund, join­ing a list of mon­ey-man­age­ment firms hop­ing to buy beat­en-down mort­gage secu­ri­ties on the cheap. . .”
(“Pim­co Starts Dis­tressed-Debt Fund” by Craig Karmin; The Wall Street Jour­nal; 9/13/2007; p. C2.)

9. One of the fac­tors dri­ving the resur­gence in anti-Semi­tism is a clever psy­cho­log­i­cal war­fare cam­paign waged by the Arabs to gain sym­pa­thy for their side by cre­at­ing pho­ny atroc­i­ties sup­pos­ed­ly com­mit­ted by the Israeli armed forces. (Mr. Emory dis­cussed this at some length in FTR#’s 564, 565, 566.) One of the most dra­mat­ic, high­ly pub­li­cized and emblem­at­ic of these was the death of a boy named Mohammed al-Dura, alleged­ly killed by Israeli Defense Forces in a cross-fire with Pales­tin­ian com­bat­ants. That case is once again in the news as lit­i­ga­tion in France is gen­er­at­ing a call to review the raw footage pro­duced by the French tele­vi­sion sta­tion that filmed the inci­dent. There is seri­ous evi­dence that the inci­dent may have received dis­tort­ed cov­er­age or may even have been fab­ri­cat­ed alto­geth­er. Mr. Emory rec­om­mends that peo­ple view an online video about some of the fal­si­fied Israeli atroc­i­ties, titled “Pal­ly­wood.”

Note: Mr. Emory does not con­sid­er all of the infor­ma­tion in the video to be compelling—some is open to inter­pre­ta­tion dif­fer­ent from that of the nar­ra­tor. How­ev­er some of the footage, such as Mohammed al-Dura calm­ly rais­ing his head to peek at the cam­era and then calm­ly lay­ing back down again are very damn­ing to the offi­cial ver­sion of the case. Al-Dura is not behav­ing like some­one with a fatal abdom­i­nal wound from an M‑16. By the same token, the footage of an alleged­ly “dead” or grave­ly wound­ed Pales­tin­ian lift­ing his head to check his cell phone mes­sages and then calm­ly play­ing “dead” again is reveal­ing. Most alarm­ing of all is the fact that “60 Min­utes” pre­sent­ed some of this mate­r­i­al alto­geth­er uncrit­i­cal­ly. The film is avail­able at: http://www.seconddraft.org/cur_invest.php. Two oth­er sites to be exam­ined in this con­text are: http://www.seconddraft.org/movies.php and an ana­lyt­i­cal treat­ment of the “Pal­ly­wood” doc­u­men­tary: http://www.theaugeanstables.com/category/pallywood/ .

“Mohammed al-Dura’s gut-wrench­ing death is run­ning again on tele­vi­sion screens across the world, sev­en years after the 12-year-old boy died in his father’s arms in a hail of bul­lets. An appeals court in Paris has demand­ed to see the exclu­sive footage shot by state-owned France 2 tele­vi­sion to resolve a libel case brought by the chan­nel and its vet­er­an Jerusalem bureau chief Charles Ender­lin against a com­men­ta­tor who accused them of fab­ri­cat­ing the Sept. 30, 2000, inci­dent on the sec­ond day of the intifa­da upris­ing. The images of Mohammed’s death after he was caught in cross fire between Pales­tin­ian gun­men and Israeli sol­diers at the Net­zarim junc­tion out­side Gaza City became the most potent icon of the Pales­tin­ian upris­ing and per­haps the most fre­quent­ly broad­cast image of the Pales­tin­ian-Israeli strug­gle in the Arab world. The boy has been men­tioned by Osama bin Laden, and his pho­to­graph could be seen on a wall where the Amer­i­can jour­nal­ist Daniel Pearl was mur­dered in Pak­istan in 2002. Streets, parks, youth camps and pub­lic build­ings have been named in Mohammed’s hon­or by the Pales­tin­ian Author­i­ty, and some sui­cide bombers said they mar­tyred them­selves in trib­ute to his mem­o­ry. . . .”
(“Boy Killed at Start of Intifa­da Back in News” by Matthew Kalman; San Fran­cis­co Chron­i­cle; 10/4/2007; p. A8.)

10. Indica­tive of the grow­ing insti­tu­tion­al­ized anti-Semi­tism in Amer­i­can acad­e­mia is the for­mal exclusion—recently rescinded—of Israelis from a pro­gram run by the Uni­ver­si­ty of Cal­i­for­nia that gives busi­ness train­ing to res­i­dents of coun­tries of the Mid­dle East. “A U.S. State Depart­ment-fund­ed Uni­ver­si­ty of Cal­i­for­nia pro­gram which pro­vides busi­ness train­ing for res­i­dents of the Mid­dle East specif­i­cal­ly exclud­ed Israeli Jews — until Jew­ish jour­nal­ists protest­ed. The Uni­ver­si­ty of Cal­i­for­nia has now altered the pro­gram’s eli­gi­bil­i­ty require­ment that ini­tial­ly barred Israeli Jews. The turn­around in pol­i­cy also may have saved the State Depart­ment, whose Mid­dle East Part­ner­ship Ini­tia­tive (MEPI) finances the pro­gram, from hav­ing to pro­vide an embar­rass­ing expla­na­tion. MEPI also selects the par­tic­i­pants. . . .”
(“Univ. of Cal. Backs Down from ‘No Jews Allowed’ Pro­gram” by Tzvi Ben Gedalyahu; IsraeNationalNews.com; 10/03/07.)

11. Two video pro­duc­tions are being gen­er­at­ed by a cou­ple of doc­u­men­tary film­mak­ers. One is a DVD of a three-lec­ture series called “The First Refuge of a Scoundrel: The Rela­tion­ship Between Fas­cism and Reli­gion.” In addi­tion, there will soon be a doc­u­men­tary about Mr. Emory, titled “The Anti-Fas­cist.” For more about this project, vis­it TheAntiFascist.com.


One comment for “FTR #613 The Socialism of Fools, Part 2: American Dreyfus”

  1. There’s been a big shake­up in the lead­er­ship at PIMCO: Mohamed El-Erian is out and as a result there’s no heir appar­ent for Bill Gross. So the future of PIM­CO’s lead­er­ship is sud­den­ly very much in ques­tion:

    Pim­co’s Gross declares El-Erian is ‘try­ing to under­mine me’
    Pub­lished: Fri­day, 7 Mar 2014 | 1:35 AM ET

    Bill Gross, the co-founder and co-chief invest­ment offi­cer of Pacif­ic Invest­ment Man­age­ment Co, has accused depart­ing CEO Mohamed El-Erian of seek­ing to “under­mine” him by talk­ing to The Wall Street Jour­nal about deep­en­ing ten­sions between the two exec­u­tives who had been joint­ly run­ning the world’s largest bond house.

    Gross told Reuters that he had “evi­dence” that El-Erian “wrote” a Feb­ru­ary 24 arti­cle in the Jour­nal, which described the wors­en­ing rela­tion­ship between the two men as Pim­co’s per­for­mance dete­ri­o­rat­ed last year, includ­ing a show­down in which they squared off against each oth­er in front of more than a dozen col­leagues at the fir­m’s New­port Beach, Cal­i­for­nia head­quar­ters.

    Gross, who over­saw more than $1.91 tril­lion in assets as of the end of last year and who is known on Wall Street as the ‘Bond King’, said in a phone call to Reuters last Fri­day: “I’m so sick of Mohamed try­ing to under­mine me.”

    When asked if Reuters could see the evi­dence about El-Erian and the alle­ga­tion he was involved in the arti­cle, Gross said: “You’re on his side. Great, he’s got you, too, wrapped around his charm­ing right fin­ger.”

    He said he knew that El-Erian, who had been wide­ly seen as the heir appar­ent to Gross but is now due to leave in mid-March, had been in con­tact with Reuters as well as the Wall Street Jour­nal.

    Gross indi­cat­ed he had been mon­i­tor­ing El-Eri­an’s phone calls.

    A Pim­co spokesman said in an emailed state­ment: “Mr. Gross did not make the state­ments Reuters attrib­ut­es to him. He cat­e­gor­i­cal­ly denies say­ing this firm ever lis­tened in on Mr. El-Eri­an’s phone calls or that Mr. El-Erian ‘wrote’ any pre­vi­ous media arti­cle.”

    He added: “As a reg­u­lat­ed com­pa­ny, PIMCO is required to retain records of its employ­ees’ com­mu­ni­ca­tions to help ensure com­pli­ance with the fir­m’s poli­cies.”

    Pim­co’s own­er, Ger­man finan­cial ser­vices com­pa­ny Allianz SE, was not avail­able for com­ment.

    El-Erian, who was named to a part-time posi­tion as chief eco­nom­ic advis­er to Allianz last week, could not be reached for com­ment.

    When asked about Gross’s claim that El-Erian “wrote” the arti­cle, a spokes­woman for Dow Jones, the pub­lish­er of The Wall Street Jour­nal, said: “This is an astound­ing­ly incor­rect claim about a thor­ough­ly report­ed arti­cle that was in the best tra­di­tion of The Wall Street Jour­nal.”


    Some Pim­co Investors on edge

    The lat­est signs of a rift between Gross and El-Erian, who once praised each oth­er ful­some­ly, come as Gross is grap­pling with clients who are also turn­ing their backs on the very asset class that has made him famous.

    That is hap­pen­ing part­ly because the Fed­er­al Reserve con­tin­ues to reduce its con­tro­ver­sial bond buy­ing that has pro­vid­ed stim­u­lus to the U.S. and world economies.

    Pim­co saw its assets under man­age­ment shrink by $80 bil­lion in 2013 due to out­flows and neg­a­tive returns, accord­ing to Morn­ingstar. In Feb­ru­ary, Gross’s flag­ship Pim­co Total Return Fund had $1.6 bil­lion of net out­flows, its 10th con­sec­u­tive month of out­flows, and it lagged 71 per­cent of its peers with a return of just 0.52 per­cent last month, accord­ing to Morn­ingstar. In 2013, it suf­fered a neg­a­tive total return of near­ly 2 per­cent.

    In mid-Feb­ru­ary, Gross sought to reas­sure the fir­m’s clients about the new lead­er­ship struc­ture he has put in place since Pim­co’s announce­ment of El-Eri­an’s depar­ture on Jan­u­ary 21.

    Gross called his announce­ment of six new deputy chief invest­ment offi­cers a “sig­nif­i­cant improve­ment” from Pim­co’s pre­vi­ous struc­ture, which con­cen­trat­ed near­ly all invest­ment strat­e­gy deci­sion mak­ing onto the shoul­ders of Gross and El-Erian.

    “I’ve nev­er seen Bill and Pim­co scru­ti­nized like this before. This is the most atten­tion I have seen on them,” said Eric Jacob­son, Morn­ingstar senior ana­lyst who has cov­ered Pim­co for near­ly two decades. “A cou­ple of high-pro­file stum­bles and mediocre show­ings, cou­pled with some out­flows — and with no iden­ti­fied suc­ces­sor for life after Bill — clear­ly has some investors on edge.”

    Still, Jacob­son said that Gross holds one of the best records in the bond indus­try with the Pim­co Total Return fund’s 10-year and 15-year annu­al­ized returns at 6.04 per­cent and 6.68 per­cent, respec­tive­ly. The fund’s returns are beat­ing 96 per­cent of its peers for those time peri­ods, he added.

    Posted by Pterrafractyl | March 7, 2014, 10:09 am

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