Speech
Remarks of Bill McLucas
ASECA Annual Dinner
MARCH 25, 2010
Thank you, Stanley, for your generous and kind remarks which were, as always, unpredictable.
I want to express my appreciation to the alumni association for this honor and to all of you for supporting this event.
When John Hartigan called me to tell me I would be this year's nominee, I called a number of my friends and said, “You know, first of all, I’m not old enough for this award, am I? And secondly, I don’t think I’ve accomplished anything that would justify it. . . . .”
Each of them immediately cut me off and said “No, believe me, you’re old enough.”
I tried to draw them out by saying “But I’m not sure I’ve really done anything . . .” and to a person, each repeated, before I could finish, “Don’t worry, you’re old enough.” Of course, having that affirmation of my accomplishments even from some of my closest friends made me feel great. I want to thank each of them for the vote of confidence.
*******************************************************
I want to say a word to the Commission staff who are here this evening.
All of us – perhaps especially those of us who do battle with you daily and challenge you on a variety of fronts as we represent our clients, have been and will remain enormously supportive of this agency and most importantly, its mission.
We’ve all heard the criticism and the attacks that have been mounted against the SEC over the past two years. Whatever criticism the agency has endured – and while some of it may well be fair, much of it has been misplaced in my view – I know the agency has taken it seriously and taken steps to address the issues, real or perceived. The SEC has most certainly received a disproportionate degree of blame for policy, regulatory, and market failures that seem to me to be more properly assigned elsewhere.
But we don’t need to go there tonight.
You need to keep your focus, keep in mind all the successes the agency achieves for investors, most of which do not get the attention you’d like in this climate. You have to keep moving ahead.
In that regard, I’d offer a few observations.
First, you have strong leadership from the Chairman and the Commission. You are fortunate to have a Chairman who is tough, has great respect for the staff, knows the regulatory landscape and is a real leader, and you have a strong Commission that is very supportive of what you do.
Second, notwithstanding some tough days that have demoralized the agency, the staff is still among the best in government and the leadership team at the division and office levels is outstanding and as strong as it has ever been.
Now, because of the extraordinary concern and anger out there about what has happened in the marketplace, this is a time when the critics sometimes need little in the way of facts or evidence to find fault or to assign blame for perceived failures. Indeed, along with the staff, the private securities bar, particularly the SEC alumni, have now become, in some quarters, a target for such criticism.
Indeed, I happen to know some of those who’ve been obliquely referred to in the criticism and innuendo. And, I’d say both to my colleagues in private practice and to those of you with the Commission, this is especially a time when all of us have a heightened duty not to shrink from our obligations as lawyers. Each of us took an oath to represent our clients and most importantly, to do so ethically. Those of you on the staff must make the right calls for the right reasons, based on the facts, the public interest, and the fairness that is absolutely essential to the SEC’s daily process. And, those of us in the bar must represent our clients well and represent them ethically.
If we do anything less, if we shrink from those responsibilities or are cowed by some fear of unfounded criticism or innuendo, then we’ve failed our clients. And, most importantly, we’ve failed in our duty to the broader public interest. And that, my friends, would truly be unfortunate.
Now as the SEC goes forward, it seems to me that you will need both a little luck and a sense of humor.
On that last point – humor – do not underestimate how critical it is to helping you keep your focus and your perspective. In the climate we are in, the day-to-day business of the SEC is indeed as serious as it’s ever been. But at least occasionally, you need to be able to laugh, not just as us in the defense bar, but also as yourselves, in order to keep the right focus.
So in that spirit, I’d like to share a few stories from my tenure at the Commission.
*******************************************************
I served under five Chairmen – Harold Williams, John Shad, David Ruder, Richard Breeden and Arthur Levitt – and under the last two, I was the Director of the Enforcement Division.
I started as a staff lawyer under Stanley Sporkin.
Sometimes there is value to being anonymous, even with the SEC.
I was working for Stan Sporkin as a staff lawyer for almost a year when I was summoned to my first meeting in Stan’s office with counsel for someone we were planning to sue. I prepared for two days, having no idea what would transpire at this meeting. The defense counsel made their presentation. Then Stan asked them to give us a few minutes and they stepped out into the spacious waiting area in front of his office at 500 North Capitol Street.
The room fell silent. Stan looked around at the branch chief and the assistant director, then he glanced over at me. Minutes passed, and not a word was spoken. Stan then summoned my branch chief over, pointed at me, and I could hear him whisper, “Who is he? Isn’t he one of them?”
My branch chief, Richard Brodsky, who was in no danger of ever becoming a diplomat, said quite directly, “Stan, this is Bill McLucas, remember, he works for you.” Stan immediately responded with a line that I eventually found to serve me well in many similar circumstances.
Waving his arm with dismissive but absolute confidence, he said, “I knew that.” And we moved on. Stan never forgot who I was after that.
Years later, I was to become an associate director. After Gary Lynch became the director of the division, his position remained vacant for a number of months. Finally one day, Gary came into my office and said “The chairman wants to interview you at 4 o’clock.”
I went to Chairman Shad’s office, was ushered in and we talked for 15 minutes or so. Suddenly, the chairman put his hands on the desk, got up and came around and extended his hand to me and said: “I’ve really enjoyed our little chat. You know, I’ve been seeing you at the Commission table every week for almost the past four years. Now, finally, I’ll be able to put a name with that face.”
I went back downstairs and Gary asked, “How did it go?”
I responded, “I’m not sure, it seemed to go well but he had no idea who I am.”
Richard Breeden became the 24th Chairman of the SEC in October 1989. He did not, however, appoint an enforcement director right away. Rather, for about three months he conducted what I would characterize as an audition for the position.
Meanwhile, he had to face his first major challenge as chairman. Congressional hearings into the failure and bankruptcy of Lincoln Savings &Loan, a thrift then run by Charles Keating. Keating had contributed to a minor political scandal in Washington in connection with alleged influence peddling and the “Keating Five” – a group that included five senators: Alan Cranston, John McCain, Don Riegle, Dennis DeConcini and John Glenn, whom Keating was alleged to have entertained.
Now, as I said, Lincoln had failed and the parent had gone bankrupt. During this time, the SEC had an open investigation involving possible accounting fraud. Of course, that inquiry just happened to be under my supervision.
The real issue, however, involved Lincoln’s sale of subordinated notes of its parent in the lobby of the thrift, just a year or so prior to its bankruptcy. And, of course, these uninsured noted paid just a modest premium over an insured CD.
And I had the task of both explaining to the new chairman how it came to be that these notes could be registered with the SEC and then sold in the lobby of the thrift while we were actively investigating the company and its management for fraud. And, I had the joyous task of assisting in the drafting of the written testimony and preparing the chairman for his first Hill appearance since confirmation.
Now, pause on that for a moment. Here is a mess that the chairman had no responsibility for and yet, having walked in the door – as a Republican chairman – he was now to appear in front of the Democratically controlled House Banking Committee and Chairman Henry Gonzalez, to explain what the SEC was doing or not doing. Needless to say, my prospects of becoming the fifth director of the division grew dimmer by the day.
Finally, the day for testimony arrived. The only problem was that the panel testifying immediately before the chairman included four elderly ladies, three of whom were widows, and each of whom had lost their entire savings or retirement assets as a result of buying the subordinated notes. This was awful.
Richard and I watched the panel of elderly widows on C-Span in Congressman Markey’s office. Richard stood there fixated on the screen; I stood as close to the door as possible while still being able to hear the testimony. As the panel winds to a close, Chairman Gonzalez has one final question for each of the four ladies:
“If you could blame one person or one institution for the outrageous loss of your life savings, who would that be? Take your time, because this is important.”
We’re standing in Congressman Markey’s office; the chairman shoots a look at me, I look at my feet, then at the door, thinking, if I bolt now, I’ll save myself the public humiliation of the disaster that is about to unfold when they say “The SEC” or “Richard Breeden.”
Witness #1 leans into the microphone, stares directly into the camera lens and states: “Senator Alan Cranston.”
Witnesses #2 through #4 repeat the same name: “Senator Alan Cranston.”
As soon as the fourth witness has responded and I’ve recovered from a near death experience, the chairman turned to me and, without missing a beat said, “You know, there really is a God.”
It took perhaps a few years before I could bring myself to even talk about that moment with the chairman, but it indeed happened just as I’ve described. It was obviously a turning point in my career, which shows how much luck we sometimes need to avoid a disaster.
********************************************************
One final story:
Sometime during Chairman Breeden’s tenure the SEC moved its offices in New York to the World Trade Center. Now, by this point in time the chairman had determined that all the regional offices would report through the enforcement director so, in some sense, by that time I’d become a pretty important guy in the Commission. So I went to New York for the reception that was to inaugurate the new office opening. Many alumni were invited, Judge Kevin Duffy was to speak and the chairman was to say a few words.
I arrived several hours before the event and went to the reception area. The movers were still busy getting furniture into the space and getting the large courtroom prepared. I walked up to the reception desk where a young man sat, feet up on the desk, reading a paperback. I paused, waited a moment or two, and finally said, “Excuse me, where can I find Mr. Walker?” The young man sitting there sighed heavily, put the book down, picked up a directory and after leafing through it said “He’s down on 13, take the elevator.” He then picked up the paperback and resumed his reading.
I turned to head for the elevator but after a step or two thought better of it and walked right up to the desk again. “What’s your name?” I barked. The young man slowly lowered the book, sized me up and got a cocky look on his face. For a second there was no answer; he could tell that I was annoyed and that I clearly thought I was somebody important. Then he said matter-of-factly, “I don’t work here; I’m with the movers.”
Well, that shut me up; and I can honestly say, for a moment I envied him. I had always wanted to say something like that to someone who thought they were important.
Now, that’s a McLucas special.
**********************************************************
Concluding statement:
My years at the SEC were perhaps the most rewarding and inspiring anyone could hope for in a career. The people I worked for and with – from Stan Sporkin, Irv Pollack, David Ruder, Richard Breeden, and Arthur Levitt – to the countless friends I’ve seen here this evening – believed as much as I did in both the agency and its mission.
If there is a message I would offer to those of you now at the Commission – particularly the younger members of the staff – now, I’ve been reminded that the category “younger” actually subsumes 75% of the Commission staff, but so be it – I hope you love what you do and what you are a part of as much as we did. In all the years I was on the staff, I never woke up and thought to myself, “I wish I didn’t have to go there today.” I loved every minute of it and there was never a time I thought I would prefer doing anything else.
While I was the enforcement director I thought I had the best job in Washington. And if you ask anyone who has ever had the privilege to have the job, each will likely tell you the same thing.
My advice to you is to give the agency, the public and your colleagues 150% of yourself. You may only truly appreciate the opportunity you have and the experience you are living after you leave. And if you don’t give everything you have, you’re missing out on something that is the experience of a lifetime. And that would be a shame. Even now when the challenge seems enormous, this is a great agency and you have a great opportunity – make the most of it.
Thank you all for your patience and thanks again to the alumni association for the honor.
|
