David Woodcock was a partner at a 750-lawyer firm where profits per partner top $1.2 million a year and clients are among the most powerful corporations in the world. His colleagues included cabinet members of the Obama and Bush administrations.
A month ago, Woodcock gave it all up to become the new director of the budget-strapped, over-burdened, highly scrutinized and much criticized Fort Worth Regional Office of the U.S. Securities and Exchange Commission.
“I’m making some lifestyle adjustments, for sure,” says the 43-year-old, who now earns about $200,000 a year and spends his week nights at a low-cost extended-stay motel in Fort Worth while he and his family prepare to move from Austin.
“But this is my dream job. It opened up and I applied,” he says.
Woodcock takes over an office blamed for mishandling some high-profile securities fraud investigations, including the alleged Ponzi scheme operated by Houston financier Robert Allen Stanford, who is charged with bilking investors out of more than $7 billion.
The previous director, Rose Romero, resigned in April following repeated criticism from members of Congress and the SEC’s own Inspector General, which claimed that the office focused too much on small cases in order to boost its statistics and ignored the bigger, tougher cases – an allegation that Romero denied and that many independent legal observers say is untrue and unfair.
“I’m not here to pass judgment on what has happened in the past,” says Woodcock, in his first interview since taking over the 110-person office in late September. “I’m not saying people didn’t make mistakes. No one is perfect, including me.
“No matter what else is said about this office, the staff is smart and dedicated to ferreting out fraud,” he says. “There is nothing more important to this team than returning money to defrauded investors.”
Woodcock says his team will “not be deterred or paralyzed by the possibility of outside criticism.”
The scope of his mission is daunting. The SEC’s Fort Worth Regional Office oversees federal securities enforcement in Texas, Oklahoma, Arkansas, and Kansas.
“Job From Hell”
There are more than five-dozen Fortune 500-size companies are based in Texas alone. The region is home to more than 750 investment advisers and 15,000 broker-dealer branch offices. Three of the four largest publicly traded companies in the world – Exxon Mobil, Wal-Mart and ConocoPhillips – fall under the Fort Worth office’s jurisdiction. Every major U.S. oil and gas company is based or has large operations in the region.
Lawyers with deep knowledge of the SEC’s local operations called the regional director’s position “the job from hell.”
“I don’t know why David would take the job,” says Steve Korotash, a partner at K&L Gates who was the former assistant director and head of enforcement for the Fort Worth office until he resigned this summer. “Morale is down. The office has been battered around quite a bit.”
“David is pretty much an unknown quality, but so far, all the initial feedback about David has been universally positive,” says Korotash,. “He’s going to be an excellent director.”
Jeff Ansley, another former SEC enforcement lawyer who previously worked in the Fort Worth office, agrees.
“There’s a very jaundiced view of that office – rightly or wrongly, and I think wrongly,” says Ansley, who is now a partner at Curran Tomko Tarski and represents defendants in cases prosecuted by the S.E.C. “David will be tested very quickly. I don’t think the Inspector General is done with that office.”
Ansley and other lawyers who work closely with the S.E.C.’s regional operations are unified in thinking that Woodcock is exactly what the S.E.C. needed in a director.
After graduating with a bachelor’s degree in accounting, Woodcock worked for a year as an auditor at Ernst & Young and then three years at Price Waterhouse in information systems and risk management.
In 2000, he graduated from the University of Texas School of Law and became a securities litigator at Vinson & Elkins, where he was became a partner in 2009.
During his decade at V&E, Woodcock successfully represented several major companies in SEC-related matters involving stock options backdating investigations, auditor liability matters and alleged revenue recognition fraud. In the past couple years, he represented Austin-based semiconductor supplier Cirrus Logic and Houston-based Cyberonics, a medical device manufacturer, in separate SEC investigations.
Under SEC ethics rules, Woodcock is prohibited from participating in any investigations or enforcement actions involving all V&E clients for one year. He told The Texas Lawbook that he is permanently recused from involvement in three specific inquiries because he directly represented those clients in their current pending matters. He declined to identify the clients matter due to confidentiality restrictions.
“David’s skill set, including working at accounting firms and representing businesses in securities matters, is exactly what the SEC needs in that office and will be hugely beneficial,” says Mary O’Connor, a partner at Akin Gump Strauss Hauer & Feld in Dallas.
“The one thing I worry about with David is how is he going to get that office, with its limited resources, to cover everything that needs to be investigated and not miss key matters,” says O’Connor, who regularly represents large publicly traded corporations and board members involved in SEC investigations. “There’s a significant risk of burnout.”
The Fort Worth office’s task will be challenging, according to Romero, who is now a partner at Thompson & Knight in Dallas. She says that the SEC staff in Fort Worth recognizes the “drama and politics and have done a good steering clear of it.”
“One of David’s biggest challenges is going to be the numbers,” she says. “There’s just so much to cover. But David has a lot of enthusiasm.”
“If you want us to file cases against all the fraud that technically fit into our jurisdiction, we need a lot more resources,” Woodcock said. “But we don’t have those resources. So, we must make decisions, and we’ve decided to pursue matters that impact the most people and that have the biggest effect on the market.”
Woodcock says he also plans to increase collaboration between the enforcement and examination sections and develop stronger working relationships with Texas securities regulators, the state attorney general’s office, and FINRA.
Another priority is stopping fraud in the oil and gas market. While the SEC declines to discuss specific cases or even numbers, securities lawyers say that there has been a significant increase in the number of investor complaints about unregistered stock offerings and over-stating the life of wells.
“When investors complain, it is usually because they believe they were over-promised on the true potential of the drilling product,” said Woodcock. “In our investigations of such complaints, we often find that firms have misused the funds to support lavish lifestyles or that they’ve exaggerated the potential for success.”
Woodcock points out that the Fort Worth office last year hired a full-time geophysicist to help with energy–related fraud cases.
“This is an increasing part of our workload and we take it very seriously,” he says.
Jones Day securities litigation partner Scott Fletcher recently conducted an informal poll of his colleagues at firms across Texas and concluded that Woodcock can “reshape the office’s public image and reinvigorate its enforcement efforts” by focusing on high profile cases involving insider trading, violations of the Foreign Corrupt practices Act and financial fraud.
Korotash points out that there are “difficult, complex matters currently moving through the system that will present significant challenges” to Woodcock and the Fort Worth office in the very near future.
“These are very important matters that are going to require a great deal of David’s time and attention,” he says.
Woodcock, who hopes to hire a new chief deputy within the next month, said he has no plans to do any major restructuring of the office.
“David needs to re-energize the office and remind the staff that they are the cop on the beat, because the SEC doesn’t come across as very active in Texas, particularly not in Houston,” says Kenneth Held, a securities litigator at Vinson & Elkins who has worked with Woodcock on several cases. “The good news is that David is a great trend spotter, which is something the SEC desperately needs.
“David is right,” he continued. “This is his dream job and he is perfect for it.”
Mark Curriden is senior legal affairs writer for TexasLawbook.net and he is Writer in Residence at SMU Dedman School of Law.