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The rise and fall of an oil patch power broker

report on business

A broker's breakdown

Calgary investment adviser Adam Woodward was riding high on the oil boom. But when crude crashed, so did he

The floor-to-ceiling windows at Richardson GMP's office in the Eau Claire neighbourhood of Calgary offer a breathtaking view of the Bow River valley. Most brokers who work in the 22nd-floor office admire the panoramic vista from afar, but in August, 2015, Adam Woodward was staring at the vast expanse of glass with a different thought in mind: He was wondering if he could run through it.

Mr. Woodward, one of the city's most successful stock brokers, had just helped nail down a $1-million financing for a small energy company, his specialty. He was a player – an oil-patch moneymaker who had managed as much as $200-million in assets during the most recent oil boom, when crude was hovering around $100 (U.S.) a barrel.

But now oil was tanking, and – despite the success of the recent deal – so was Mr. Woodward. His marriage was over, his personal finances were in shambles and clients were asking difficult questions about the investments he'd been making on their behalf. Some were seeing the values of their portfolios drop by more than 50 per cent and, while the price of oil was partly to blame, Mr. Woodward knew that something else had been going on too: Unbeknownst to clients, he'd been channelling their money into companies that were among the riskiest in a collapsing oil market.

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Speaking to his branch manager and long-time colleague, Blair Pytak, in the area of the office known as the bullpen, Mr. Woodward said that he wanted out – out of the business and possibly out the window. "I'm going to fucking do it," he recalls saying. His supervisor urged him to calm down, he says. Others in the office froze.

It was a dramatic moment that could have spelled the end for Mr. Woodward. But back on that day 1in 2015, His supervisor talked him down. "Guys like you don't quit," he remembers being told, as part of a pep talk that got him through the day and kept him on the job. For a while.

In less than a year, he'd be in the midst of an alcohol treatment program, and – along with Richardson GMP and Mr. Pytak – the target of a $50-million lawsuit, brought by former clients, accusing him of negligence by doctoring account documentation so that he could pursue a high-risk investment strategy, regardless of their true risk tolerance.

"I never stole money," Mr. Woodward, 39, says. "But I misled. I fabricated. I controlled the marketplace, because I had so much money behind me at that time."

His story, which he agreed to share with The Globe and Mail, provides a startling illustration of how much control investment advisers can have over clients' financial well-being, even with a national firm supposedly providing checks and balances. The case raises questions about the effectiveness of the brokerage's compliance department and comes amid growing discontent across the country over the investment industry and whether it works, as advertised, in clients' best interests.

Late last year, Richardson GMP, Canada's largest independent brokerage, had been close to a $600-million sale to Toronto-Dominion Bank, but the deal was called off and untenable business and legal risks are said to be among factors that led the bank to walk away. It is not clear that Mr. Woodward's case was the specific reason for the takeover proposal to be kiboshed in its due-diligence stage, but sources said the bank was uncomfortable with Richardson GMP's higher risk culture.

Adam Woodward, pictured at left.


A meteoric rise and fall

Mr. Woodward's downfall happened quickly. So, too, did his rise to financial stardom. Known around town as Woody, he was sought after for his sales prowess and connections to blue-ribbon oil-patch entrepreneurs. The former nightclub manager had rocketed up the ladder in Calgary's investment community in less than a decade, making money early in his career on shares of Peyto Exploration and Development Corp., the successful natural gas producer co-founded by his uncle, Rick (Buck) Braund, and oil man Don Gray.

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He moved into the investment industry in 2006 as a junior adviser at Blackmont Capital. There, he impressed his colleagues with a knack for connecting with clients and helping them navigate through the income-trust bust, when Ottawa removed the securities' tax advantages. Later, he moved up through the ranks at Bank of Nova Scotia and Macquarie Group, joining Richardson GMP as part of its $132-million takeover of Macquarie's retail brokerage unit in 2013.

By his own estimation, he was one of the top producers at Richardson GMP, a joint venture of Winnipeg's Richardson family and Toronto-based GMP Capital. With $30-billion of assets under management, the brokerage positions itself as a high-end provider of wealth management services, concentrating on advice for investments, retirement and estate planning.

His clients enjoyed hefty returns, at least on paper, as the oil patch boomed in the years after the financial crisis. With all that capital at his disposal, Mr. Woodward was also a go-to guy for junior oil producers looking for funding. His first major private-equity deal, shortly after joining Macquarie, raised $4.5-million for a junior oil company, well beyond what his boss had expected. At 5 per cent, the fee was impressive.

Mr. Woodward enjoyed being an industry player, describing the satisfaction he felt being at the centre of big deals. "I'm the show," he recalls thinking, "and people are dropping comments like, 'you're incredible.'" Within the firm, his growing team was branded as Woodward Asset Management, a display of the stature he was gaining around town for junior-energy financings and an investment strategy for his clients that included small, privately held companies.

Such investments offer both promise and peril. In a bull market, they can create a buzz among investors based on who is running them and what prospects they are said to have. Unlike publicly traded companies, private companies also offer the allure of exclusivity – the idea that there is an opportunity not easily accessible to everyone. There are inherent risks, however. There is often far less financial disclosure and when an industry falls out of favour, potential buyers disappear and investors are left holding shares with little value.

As the oil industry boomed prior to late 2014, that was not a problem for Woodward Asset Managment. Mr. Woodward and his team flew high, doing deals, making serious coin, buying property and taking lavish trips to Las Vegas, Phoenix and Aspen. In the best years, he netted more than $2-million annually, though he says his debts, expensive tastes and drinking prevented him from saving any. In his own mind at least, he was invincible. But his inflated sense of self was a gross miscalculation fuelled partly by alcoholism, he says, and the kind of arrogance exemplified by Jordan Belfort, depicted in the film The Wolf of Wall Street.

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Mr. Woodward says he isn't proud of his behaviour now, but he recounts just how brash he had become when oil was a hot commodity and he, his clients and his team were at the peak of their investment returns. Case in point: At a conference for Richardson GMP investment advisers at a swish resort in Scottsdale, Ariz., in the spring of 2014, he stood out in the crowd from the moment he arrived. While brokers hobnobbed in business attire, he appeared in shorts and a golf shirt – ready to party hard. "I show up like I'm from a Hunter S. Thompson book," he says. "I'm wasted and chirping."

At a country-themed dinner event, Mr. Woodward pulled up in a town car he had hired, wearing sandals and gulping vodka and Red Bull. He slipped the band $100 to play the Journey hit Don't Stop Believin'.

"I jump on a table full of advisers and do a rock-star kick, air guitar," he says. Then it was back in the town car with a pair of branch managers to paint the town.

Things began to go sour in late 2014, when OPEC cranked open its oil taps and triggered a price crash to below $30 (U.S.) per barrel. Even the oil patch's largest and best-financed companies, including Suncor Energy Inc., Encana Corp. and Cenovus Energy Inc., were forced to slash spending, cut staff and sell assets as cash flow dwindled and share prices tumbled. Capital markets turned their backs on the smaller players, which struggled to meet their debt obligations.

The crash took a heavy toll on Mr. Woodward and his investors, who had hundreds of accounts with Richardson GMP. Losses tallied into the millions. As troubles mounted, the adviser's alcohol addiction, a years-long problem, took over.

By the summer of 2015, some of his clients were asking questions about how and why their money had been funnelled into investments that were looking like risky bets, and Mr. Woodward couldn't figure out a way to fix the mess – there was no market for many of the investments. He was living at his vacation house in Windermere, B.C. – his wife had demanded he leave the family home – and his behaviour was becoming increasingly erratic. Even before the crash, he had stopped bothering with business attire, arriving at work dishevelled in flip-flops and shorts. He spent much of his time doing business via text message from a popular watering hole close to Richardson GMP's Eau Claire office on the north side of downtown Calgary. "It was well publicized that I was a raging lunatic," he says today.

But on that day in August when he said he wanted to quit, his boss wouldn't hear of it. A few months later, though, at the urging of his extended family, Mr. Woodward checked out of the financial world and into a treatment program, where he remained for the better part of a year.

He emerged from rehab in late 2016, and since then has resigned himself to the near certainty that his career in the brokerage industry is done. Having lost his house and his savings, he's been homeless for short stints, crashing on a friend's couch at times. Currently, his aunt helps him with his rent on a small bungalow in a southwest Calgary neighbourhood.

Former clients have little, if any, sympathy for Mr. Woodward's personal travails. The plaintiffs in the $50-million suit, Amanda and Kevin Fisher and Bruce and Christina Johnson, have applied for class-action status. They claim many investments in their accounts should never have been made. They allege Mr. Woodward disregarded their stated risk tolerance, failed to seek informed consent for investments and ignored specific instructions. About 40 other clients have joined the suit. The action also charges that Mr. Pytak and Richardson GMP failed to adequately supervise Mr.Woodward as he went about making questionable investments, and neglected to take steps to stem the losses after he went into treatment. There are no allegations that any client funds were pocketed by the adviser.

An excerpt from a lawsuit against Mr. Woodward and GMP.


In an affidavit filed in May, Ms. Fisher, 35, describes how Mr. Woodward had been a friend as well as long-time adviser. Between 2014 and this year, the value of accounts owned by her and her husband, invested heavily in private energy companies, shrank by an astonishing 90 per cent, from $477,400 to $47,600. She said that by the summer of 2015 she became concerned about steep losses recorded in her monthly statements and tried to contact Mr. Woodward several times, often without success.

"On the few occasions I was able to get a hold of Adam Woodward … he assured me that he was one of the most successful investment advisers at Richardson GMP and that he had things under control," she said in the court document. "Adam repeatedly told me not to worry, and that I should trust him. Starting in about late November, 2015, I stopped getting any response from Adam to my inquiries."

The Johnsons say they had hoped to retire soon on their nest eggs. Mr. Johnson, 57, said in his affidavit he expected Mr. Woodward and Richardson GMP would make investment suggestions based on the couple's stated objectives. The Johnsons, who say they are not sophisticated investors, say their broker assured them that private companies offer superior rates of return. Within two years, the value of their portfolio had dwindled by 60 per cent to $1.2-million.

"As a result, we have been forced to make significant lifestyle changes, including requiring me to find additional part-time work, and requiring Christina to find a new job, despite the fact that we are both in our late 50s," he said.

More than two dozen other former Woodward clients have entered into settlements with Richardson GMP in recent months on undisclosed terms, in hopes of moving on from the episode, according to people familiar with the case.

The defendants – Mr. Woodward, Mr. Pytak and Richardson – have yet to file statements of defence. But Mr. Woodward told The Globe he wanted to make his story public in order to shine a light on the investment industry's practices and show how addiction can tear apart the lives of addicts, their families and others around them. He stresses that he is not looking for absolution.

"There's no redemption in my story," he said. Indeed, he has offered himself up as a cautionary tale, someone driven to extremes by ego and a need for acceptance.

Mr. Woodward has an easygoing, self-deprecating manner. He disputes few of the allegations levelled against him and acknowledges that he feels guilty about the role he played in his former clients' predicaments. But he contends he did not act alone; he was part of a team within a firm and no one questioned the practices when the money was flowing.

An excerpt from a lawsuit against Mr. Woodward and GMP.


Meanwhile, businessman Dan Anderson, a Woodward client but also a director and executive at some of the companies that were mainstays of the portfolios, filed a claim against the broker and his employer for $10-million, claiming breach of trust and negligence for conducting transactions that were against instructions and outside of stated risk tolerance.

In another suit, Mr. Anderson seeks repayment of $716,000 that he lent Mr. Woodward. The loan had been secured against the Woodwards' house, in itself an ethical breach. (In an affidavit, Mr. Woodward's ex-wife Elena said she was unaware that the couple's home was put up as security.) Mr. Woodward said in a court document that Mr. Anderson had demanded his broker invest in the same securities he was recommending, so he had "skin in the game." Mr. Woodward did not have sufficient funds of his own, so Mr. Anderson lent him the money, according to the affidavit.

None of the claims has been tested in court. Mr. Pytak declined to comment, directing queries to the dealer's head office.

The situation is the subject of an investigation by the Investment Industry Regulatory Organization of Canada, the sector's self-regulation body, which has interviewed several of those involved. An IIROC spokeswoman declined to acknowledge the probe and said the organization does not comment on investigations when they are under way.

In an interview in early June, Richardson GMP's chief executive officer, Andrew Marsh, would say little about the case, apart from the fact that the firm is "doing everything we can to work with the regulators, every step of the way, to protect client interests."

He also declined to say what kind of internal investigation is under way. "What I can say about that is we have a very high reputation within our regulators and we are seen to be in the highest regard in terms of compliance and risk management. We have a very close relationship with IIROC," Mr. Marsh said.

Richardson GMP officials declined to comment on any specific allegations.

An excerpt from a lawsuit against Mr. Woodward and GMP.


In numerous discussions with The Globe and Mail over many months, Mr. Woodward described how investments were made and recorded on behalf of some clients, to make sure their accounts fit within the investment strategy.

Now, he wants the investing public to be much more vigilant – to warn them that hiring the services of a well-known dealer does not free clients from studying monthly statements and asking difficult and regular questions of advisers who have considerable influence on their retirement savings.

Undoubtedly, this will ring hollow with former clients, who, according to court documents, were overwhelmingly listed on brokerage documentation as having the highest tolerance for risk, regardless of their personal goals, ages and life situations. In many cases, these clients did not have detailed experience with companies and industries, or reams of research at their fingertips, to know how diversified and protected against risk their accounts were, says Robert Hawkes, the Calgary lawyer leading the class action.

"Further, most class members simply didn't have the financial background to realize, for example, that private companies are relatively illiquid and during a falling market are often completely illiquid," Mr. Hawkes said in an e-mail. "For those that did ask questions, we expect the evidence to establish that most often they were reassured by the defendants and discouraged from requesting any changes."

At the heart of the legal and regulatory action is the know-your-client, or KYC, rule – a paramount part of the code of conduct among investment dealers aimed at protecting clients against buying securities that do not fit with their income, lifestyle, level of financial knowledge and tolerance for risk. Anyone who hires the services of a registered representative is asked a series of questions that help the dealer arrive at a profile that helps guide the types of stocks, bonds, mutual funds and other securities to buy and sell – and the resulting document is kept on file. Gambling a sizable chunk of savings in a speculative penny-stock in the energy or mining sector, for example, would generally not be suitable for a teacher with limited income who is a year or two from retirement.

Mr. Woodward said he made sure to invest money from virtually all his clients – from high-net-worth individuals to average working people – into private and public energy investments, some of which he had a role in setting up and financing. His team would structure documents to reflect a high tolerance for risk. The lawsuit alleges that clients were sometimes asked to sign incomplete forms, and information was added later to suit the broker's investment strategy.

Dean Holley, a former broker and regulator, studied clients' monthly statements and documents as an expert witness for the plaintiffs in the Fisher-Johnson case. An overwhelming number with diverse personal situations were listed as having aggressive and high-risk investment objectives, he said in an affidavit. Any diligent review of new accounts by Richardson GMP should have detected something was amiss, he said.

"In my experience, patterns of uniformly aggressive investment objectives for an investment adviser's clients, particularly when those clients are not sophisticated investors and the objectives are applied across all types of account, including retirement savings accounts, are a clear warning sign that the objectives recorded on KYC forms may be those of the investment adviser and not the clients," Mr. Holley said in his affidavit.

The issue of the fiduciary duty of financial advisers has been front and centre in recent months with major banks getting criticized for their advisers putting their institutions', and even personal, interests before those of their clients – all to boost sales and generate maximum fees. Mr. Woodward sees himself as part of the problem, but is also adamant he did not act alone. His actions (and, if he is to be believed, those of the people around him) appear to have played a role in scuttling the takeover of his firm.

Last year, Richardson GMP had been discussing a sale of the business to Toronto-Dominion Bank for an estimated $600-million, but the talks broke off in November. At the time, Richardson GMP said it had decided instead to pursue its own growth. However, a person familiar with the discussions said fears about investment, regulatory and legal risks that became apparent during the due-diligence stage were at least partly responsible for the deal falling through.

Turning down bids, Richardson GMP opts to expand from within Read The Globe's coverage of Richardson GMP's owners turning down a $600-million payday.

TD executives were uncomfortable with Richardson GMP's risk appetite, which was more aggressive than TD's relatively conservative culture, according to the source, who did not specifically cite the legal action against Mr. Woodward, launched a few months before.

For instance, the bank uncovered issues with the wealth-management firm's know-your-client protocols, that person said. Moreover, the level of turnover in Richardson GMP's portfolios also left TD's executives feeling uneasy, as did the firm's disproportionate focus on illiquid, privately issued securities, that person said. The due-diligence process also uncovered litigation risks and previously undisclosed regulatory concerns. A TD spokeswoman declined to comment.

On the investment front, a lot of clients' money went to ventures within a tight web of energy executives with ties to Mr. Woodward. Artisan Energy was a case in point – a junior oil company that counted Mr. Anderson as a director, as well as Donald Macdonald, founder of Sanjel Corp., a Calgary-based oil-service company that was sold off under creditor protection. As oil prices tumbled, Artisan fell afoul of its debt obligations and the company collapsed into receivership in 2016.

Mr. Anderson is chairman of Shelter Modular, a B.C.-based temporary housing company that counts Brad Docherty among its directors. A former securities lawyer, Mr. Docherty is also chairman of Source Rock Royalties. Source Rock and Shelter Modular, both private companies, became core holdings for Mr. Woodward's clients. Mr. Anderson declined to comment when contacted by The Globe. Mr. Docherty did not respond to an e-mail requesting comment.

A review by Mr. Holley shows the value of the securities, neither of which trade on public markets, has dwindled in the past two years, along with several other private companies that are exempt from many of the public disclosure requirements that publicly listed companies must comply with.

The hundreds of client accounts that had been under Mr. Woodward's supervision, known as the book, are now the responsibility of John Reyes, whom Mr. Woodward says was his right-hand man under the Woodward Asset Management umbrella that existed within Richardson GMP. Mr. Reyes declined to comment on the case, directing any questions to the dealer's vice-president, Susan Fry. Another Woodward team member, Dave Hudson, told The Globe by text message he was on medical leave from the dealer, and also declined to comment.

A judge is expected to rule on the certification of the class action in 2018, assuming the sides do not reach a settlement beforehand.

For his part, Mr. Woodward has yet to decide what to do next, beyond make up lost time with his children, who are 7, 8 and 10. Though he has not been officially let go by Richardson GMP, he said he does not get any salary and has yet to receive the necessary paperwork from the dealer to make an employment insurance claim. In the meantime, he said he is intent on telling his story.

"Have the clients been done wrong? Yes. Do I have anything to defend? No. Do I want to do the next right thing? Yes, by answering these questions honestly."

With files from Rita Trichur and Clare O'Hara in Toronto

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