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GC Ullyot's Exit Closes Chapter for Facebook
With his decision to log out after nearly five years as general counsel of Facebook, Ted Ullyot has opened up one of the most visible law jobs in Silicon Valley.
Under his direction, the legal department has knocked out a number of high-profile matters, ending the war with the Winklevoss twins over the company's creation, settling a patent rift with Yahoo and helping the company through its IPO and the messy aftermath, among other tests.
But Facebook's regulatory and policy agendas promise to grow more and more complex. It remains a lightning rod for privacy complaints. It is increasingly competing with both Apple and Google. And now CEO Mark Zuckerberg has moved it to the fore of the nation's immigration debate.
Ullyot's selection as general counsel came as a surprise to many, as he was coming off tours as associate White House counsel and chief of staff to U.S. attorney general Alberto Gonzales during the Bush administration.
"He was an unusual choice for Facebook in that he didn't come from the Valley," said Fenwick & West Chair Gordon Davidson, who led the legal team that took Facebook public last year. "He was the perfect choice in hindsight."
Ullyot will leave behind a legal department with some novel practices and a stock of seasoned deputies. And he will walk away flush with cash. Just this week he sold shares in Facebook worth $1.36 million, according to SEC disclosures. All told, he has cashed in more than $25 million in shares since last year's IPO. He still holds 728,824 shares, worth more than $19.3 million at recent prices.
Had Ullyot stuck around, he could have ended up with much more: He had been granted restricted stock units which vest over time and would be worth about $31.3 million at Friday's price.
Ullyot declined an interview request through a Facebook spokesman. He gave few details on what prompted him to set sail in a departure message to his colleagues, other than to note that the time seemed right.
"This summer is a natural point for me to step down, transition the reins to a new GC, and figure out the next opportunity that … takes me out of my comfort zone again," Ullyot wrote.
Ullyot would have left Facebook in a much different place one year ago, when it was dealing with shareholder outcry over its IPO and questions about the long-term viability of its business model. The company has since quelled many of those doubts, said Eric Talley, a corporate law professor at UC-Berkeley.
"The timing of when someone leaves a job is almost never accidental," Talley said. "He may be thinking, 'If I wait around, another crisis may rear its head.'"
What he built
Zuckerberg, COO Sheryl Sandberg and former CFO Gideon Yu had a clear vision of what they wanted in a general counsel five years ago, said legal recruiter Robert Major of Major, Lindsey & Africa, who handled the search.
A need for expertise in privacy already a key concern for the company led Zuckerberg, Sandberg and Yu to mine Washington, D.C., for candidates. "Significant grey matter" was also on the executives' wish list, Major recalled. Ullyot, a former Supreme Court clerk, clearly fit that bill. And he grew up in San Francisco, which gave Facebook leaders confidence that he could acclimate to the Valley, Major said.
"He certainly knew his way to Stanford stadium," Major said.
Inheriting a handful of lawyers and a loose departmental structure, Facebook's pick would be tasked with building a team, Major said. To that end, Ullyot assembled a group that could meet the company's future legal needs, said Reginald Brown, who worked with Ullyot in the Bush White House. On his watch, the department grew from 10 people to 70.
"They were hiring for what they wanted to be, not for what they were," said Brown, a Washington-based partner at Wilmer Cutler Pickering Hale and Dorr, which handles litigation and regulatory work for Facebook. "The company grew up, and they were ready."
Four lawyers in the department report directly to Ullyot: Samuel O'Rourke, deputy general counsel for intellectual property; Colin Stretch, deputy general counsel for product, regulatory and litigation; David Kling, deputy general counsel for corporate and commercial; and Chief Security Officer Joseph Sullivan. Each has considerable autonomy, liberating Ullyot to focus on strategy, say lawyers who do work for the company.
He embraced alternative fee arrangements early in his tenure as general counsel. Rather than shopping around for each matter, Ullyot strikes annual or multi-year agreements with some firms to handle all of Facebook's work in a given discipline say, corporate or IP for a flat fee, said Cooley partner Michael Rhodes, who represents Facebook in IP litigation and privacy class actions, among other matters. The arrangements give Facebook predictable expenses and rapport with outside counsel, Rhodes added.
"Ted wants to do work with the same folks over and over and develop long-term relationships," he said.
True to his D.C. roots, Ullyot has shown himself to be among the most politically savvy general counsel in the Valley, Davidson said. His legal department is known to collaborate closely with Facebook's policy arm. As a result, the company navigates Washington like a more mature player, Brown said.
"It's not that everything they've done has been flawless," Brown said. "But the number of mistakes they've made, you can count them on one hand."
Chatter abounds in the Valley about who Facebook might choose to succeed Ullyot and who can put in a good word.
Facebook hopes to select a new general counsel before Ullyot leaves in early July, people with knowledge of the matter say. And Ullyot will be involved in the search for his replacement.
Facebook is expected to survey the marketplace and take a good look at candidates within its own ranks, too. Each deputy general counsel could be a contender for the job, people familiar with the department say.
"Ted wasn't afraid to surround himself with very strong, smart lawyers," Brown said.
His successor will have a full plate of legal issues to address. Information privacy is still heating up, and labor and employment may require more attention if the company continues to expand its ranks at the same rate, Talley said. But with the IPO behind the company, things are likely to be less exciting on the securities front.
"That process was quite rightly once in a lifetime," Talley said.
As he plots his next move, Ullyot will likely be interested in teaching, serving on boards and consulting, a person close to him said. After his time is up in July, he is expected to take a break to spend time with his three kids and unwind from a whirlwind five years. But no one thinks he will stay on the sidelines for long.
As Brown put it, "He's not the kind of guy who's only going to do one thing in life."
This article originally appeared in The Recorder.